S&P lowers A&L’s long-term credit but outlook is stable

Standard & Poor’s says although it’s lowered Alliance & Leicester’s long-term credit rating, changes to the UK bank’s funding arrangements mean its off CreditWatch and the outlook is stable.

Its long-term counterparty credit rating has been lowered by S&P from A+ to A.

But the bank has been removed from the credit rating agency’s CreditWatch where its long-term rating had been placed with negative implications on January 31.

S&P has also affirmed A&L’s short-term counterparty credit rating at A-1.

Nick Hill, credit analyst at S&P, says: “This rating action follows A&L’s full-year results for 2007 and outlook for 2008. As a result of difficult funding conditions, A&L has taken out various secured borrowing facilities with a range of banks.”

S&P says these actions are prudent and have bolstered A&L’s liquidity and funding profile, while reducing its historical reliance on short-term funding.

Hill adds: “Overall, we consider that A&L’s new funding arrangements, fair degree of diversity, and its strong asset quality should support the ‘A’ rating.”

It warns though that A&L could still get a lower rating if further large impairments on Treasury assets of a similar magnitude to those of 2007 recurred in 2008, or if there were to be a sharp weakening in the UK economy or housing markets.

It says in the current market environment an upgrade is unlikely.