SHARES in Alliance & Leicester plunged 10 per cent yesterday after the bank revealed further writedowns linked to the credit crunch.
The company said it was funded into the second quarter of 2009, but added that the deteriorating value of its assets had cost it almost £400 million in the first four months of this year.
Shares in the FTSE 100 bank plummeted as the figure on writ
edowns was bigger than expected in the City.
Alex Potter, an analyst at Collins Stewart, said he had assumed just £70m of writedowns.
He added: "This is the first bank to issue news on April trading and we would have hoped for more positive news due to April's credit market improvements."
A&L said operating profits without the writedowns would have been flat for the first four months of the year.
It said its business had slowed in line with the tougher market conditions, as mortgage balances for the first four months of the year were down 4 per cent to £41.2 billion.
However, A&L said its asset quality remained strong, with just 2,650 of its 462,270 mortgage accounts being more than three months in arrears, representing 0.57 per cent of all accounts. The figure was a 300 increase on four months ago.
A&L maintained that there were no signs of stress in either its mortgage or unsecured personal loan portfolios, adding it expected its bad debt charge in the first half of 2008 to be slightly lower than the £50m reported a year earlier.
Chief executive David Bennett said:
"The asset quality of our customer loans continues to be strong, with mortgage arrears running at less than half the Council of Mortgage Lenders' average."
In February, the bank reported core operating profits of £417m for 2007, down from £585m in 2006. Pre-tax profits dropped £170m to £399m.
It also warned that soaring funding costs would leave 2008 earnings lower than last year as the crisis in credit markets looked set to cost it an extra £150m a year in securing funds for new business.
Amid the credit turmoil and collapse of America's subprime mortgage market, the company wiped £185m off the value of its investments – more than three times the £55m it had estimated in November.
The bank said yesterday the figure for the first four months of the year stood at £192m, relating to writedowns on structured investment vehicles and collateralised debt obligations.
A further £199m hit accounting for fair value changes to reserves will not impact the bank's profits.
A&L shares closed down 51.75p at 458.75p.
On Monday, A&L said it would raise rates for new mortgage borrowers who were unable to raise a large deposit.
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