A&L warns over profits amid credit crunch

Alliance & Leicester today warned that soaring funding costs would leave 2008 earnings lower than last year as it suffers amid the credit crunch.

The mortgage bank said the crisis in credit markets would cost it an extra £150m (€199m) a year in securing funds for new business.

Shares plunged by 19% at one stage after the news, which came as the group reported 2007 operating profits down nearly a third following a £185m (€245m) hit to investments from the credit squeeze.

A&L said funding would remain a priority and today pledged to keep a tight control on lending – a day after it emerged that A&L was one of a number of lenders to pull the plug on controversial 125% mortgages.