After another week of speculation about its future, Alliance & Leicester, the UK mortgage lender, has finally come out with its hands held high. Here’s a pre-close trading statement filed with the LSE.
A&L languished this week and last as the rumours got worse. The Guardian picked up Wednesday on market talk about BoE funding, and the Daily Telegraph hit out Thursday with suggestions of an “asset firesale”. Neither article quite stood up. The Guardian’s jumped on week-old gossip, and the Telegraph’s relied on a slew of whispered forecasts from analysts and bankers. Troubled times for A&L’s treasury do not a firesale make.
Today it looks like A&L will indeed put paid to both. So it would seem, cutting to the chase, that A&L’s biggest problem all along has been its silence. In the first few minutes of Thursday morning trade, A&L’s shareprice rocketed 14 per cent. A conference call is scheduled at 11:00GMT.
But while it’s clear A&L isn’t about to go cap in hand to Threadneedle Street, things are nonetheless looking very grim. Silence or no silence, those rumours had some truth to them. Recourse to the BoE was in the event, it would appear, only narrowly avoided, and there’s still every suggestion that profits will be hit hard.
As a prudent measure and in recognition of current market conditions, we have put in place additional funding facilities, a significant proportion of which are backed by Alliance & Leicester residential mortgage assets. As a result, we have now pre-funded our maturing medium term funding, commercial paper and certificates of deposit into the third quarter of 2008. In 2008, we expect our asset growth to be primarily funded through higher customer deposit balances. We will, however, continue to look at opportunities to complete further capital market transactions.
A&L’s Treasury department must have been working overtime the past few weeks to put these “facilities” in place. Another reason, then, for that odd silence and analysts’ chatter: things have only just come together.
What then might these “additional funding facilities” backed by A&L mortgages be? Securitisation? Repos? Whatever they are, A&L will be paying through the teeth for them. Spreads on triple-A prime UK residential mortgage-backed securities have roughly quintupled since June.
