Fitch downgrades Alliance & Leicester

Fitch Ratings has downgraded Alliance & Leicester, saying the action reflects the lender’s weak access to funding compared with higher rated banks.

A&L’s long term issuer default rating was cut to A+ from AA- and the short term IDR to F1 from F1+.

The outlook for A&L’s long term IDR was changed to stable.

Fitch says the ratings reflect A&L’s weaker prospects for reporting growth in profitability in 2008 and 2009, in view of higher funding costs and possible further writedowns on its structured credit portfolio.

A Fitch statement says: “These ratings also take account of the uncertainty surrounding the UK housing and mortgage lending market. A&L’s capitalisation is acceptable.

“The sound asset quality of A&L’s residential mortgage book and its ability to pre-fund its business into Q1 2009 are also incorporated into the ratings and underpin the stable outlook.”