More on Alliance and Leicester
Alliance and Leicester: Trading statement
Alliance and Leicester reported slow lending growth (assets grew just 3%) and a decline in interest margins for the first quarter of 2005. Total Group revenues for the first half of 2005 are expected to be broadly similar to 2004.
New mortgage lending has fallen and remortgaging has accounted for half of Alliance and Leicester’s lending in the first quarter of the year. The high proportion of remortgage lending has resulted in fewer cross-sales of mortgage related products such as household insurance and life assurance.
Wholesale banking is reported to have performed well and together with cost reductions, will be the driver of earnings growth this year.
Asset quality “remains strong and above average in each business sector. Arrears in mortgage assets were 0.68%, slightly ahead of December 2004 but below the 0.73% seen in December 2003. Personal unsecured loans, a problem area for a number of other banks, have not shown signs of deterioration with the proportion of balances in arrears at the end of May remaining at the same rate (4.2%) as at December 2004. Within Wholesale Banking, impairment losses in the first half of the year are expected to be slightly lower than last year.
The performance of banks was buoyed last year by house-price and consumer booms that are now fading. Asset quality has been deteriorating and loan growth has been slowing across the industry. The share trades at 866.5p, on a prospective PE of 10.1x (2005 earnings) towards the upper end of the sector range. The yield is 6.1%.
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