Alliance & Leicester Plc plunged in London trading to the lowest since going public in 1997 after the UK mortgage lender scrapped its profit target for this year and next because of the seizure in credit markets.

Alliance & Leicester said yesterday its previous target for earnings per share growth through 2009 of at least 9 percent above inflation "is no longer appropriate" because of a surge in funding costs and a slowdown in mortgage lending.

The company said in a statement that second-half profit fell 67 percent to 73.1 million pounds, or 17.4 pence a share.

The Leicester, England-based company gets almost half its funds in the capital markets and now faces rising costs and declining valuations on asset-backed securities after the US subprime mortgage slump. UK rival Northern Rock Plc is being nationalized after a bailout by the Bank of England, while Bradford & Bingley Plc reported an unexpected loss last week.

"The outlook is pretty abysmal," said James Hutson, an analyst at Keefe, Bruyette & Woods Ltd in London who has a "market perform" rating on the stock. The company's own targets "have been slashed".

Alliance & Leicester fell as much as 19 percent and traded down 12 percent at 462.5 pence as of 9:21 am in London.

The company declined 18 percent this year through yesterday, trimming its value to 2.2 billion pounds. Its initial public offering was in April 1997.

The net interest margin, the difference between revenue from loans and interest costs, will drop to about 1 percent from 1.16 percent last year, Finance Director Chris Rhodes said in a call with reporters.

Agencies

(China Daily 02/21/2008 page16)