Reply #51: Warning from A&L hits FTSE [View All]

[Ghost Dog]

The UK banks were again at the forefront of volatility on Tuesday after a profit warning from Alliance & Leicester.

A day after Credit Suisse (NYSE:CS) announced writedowns of almost $3bn, A&L said profits would be lower this year because of higher funding costs.

Impairment charges and adjustments on treasury investments cut pre-tax profits for 2007 from £569m to a less-than-expected £399m as the bank held its final dividend and said 2008 dividends would to be maintained at the 2007 level.

The news is just the latest blow to hit a sector that continues to suffer from what A&L described as "unprecedented conditions in the world's financial markets".

James Hutson, analyst at Keefe, Bruyette & Woods, said: "The outlook reads poorly, with volumes down, costs rising, margin guidance slashed, the earnings target cut and the dividend guided flat in 2008.

"Add in a weak capital position and risk of impairments rising from a low level, and the outlook is miserable, with significant earnings cuts likely."

A&L shares slumped 9.7 per cent to 477p, having been as low as 428p earlier.

In afternoon trade the FTSE 100 was down 84 points, or 1.4 per cent, to 5,882.5, a loss of 1.4 per cent. The FTSE 250 was 124 points, or 1.2 per cent, lower at 10,085.5.

The market was spooked by overnight news that KKR Financial Holdings, the listed affiliate of the private equity group, has delayed repayment of billions of dollars of commercial paper for the second time and begun a new round of restructuring talks with creditors less than six months after a rescue rights issue.

The move is a further embarrassment for KKR, following a $270m bail-out of the leveraged investment vehicle last September, which saw founders Henry Kravis and George Roberts personally inject cash.

/... http://news.yahoo.com/s/ft/20080220/bs_ft/fto022020081007449242;_ylt=AnP8BaJx9GbShvahwsvpMNz2ULEF