Alliance and Leicester shares fall a second time; But group still managing to raise funds In association with BUSINESS.Byline: BY TONY McDONOUGH Deputy Business Editor SHARES in banking group Alliance & Leicester fell for the second time in less than a week yesterday, as fears resurfaced about funding issues amid the sub-prime lending crisis. More bad news on Tuesday from the US - this time about mortgage finance firm Freddie Mac Freddie Mac: see Federal Home Loan Mortgage Corporation. - deepened the gloom around the European banking sector, with more speculation about the extent of its exposure to the credit crunch Credit Crunch An economic condition whereby investment capital is difficult to obtain. Banks and investors become weary of lending funds to corporations thereby driving up the price of debt products for borrowers. crisis. Alliance & Leicester, which has a major commercial banking base in Merseyside, depends heavily on the capital markets for at least half of its funding. However, because of the global credit squeeze credit squeeze Restricted bank lending that is accompanied by rising short-term interest rates and a decline in economic growth. Credit squeezes are generally attributed to policy actions of the Federal Reserve. , banks are now much more reluctant to lend to each other and the Libor rate - the rate at which banks offer loans to other banks - is still well over 6%. At the end of last week, shares in A&L fell more than 6% and it was forced to issue a statement saying it had not had to borrow from the Bank of England Bank of England, central bank and note-issuing institution of Great Britain. Popularly known as the Old Lady of Threadneedle Street, its main office stands on the street of that name in London. . It made a similar statement yesterday insisting it was continuing to successfully raise funds around the Libor rate. At one point yesterday, the bank's shares were down more than 5% but later recovered slightly to finish the day just under 3% down. Other banking stocks, including those of Barclays and HBoS, also came under pressure and City analysts didn't see too much light ahead. "You've still got this cocktail of the very weak dollar, high oil price, uncertainty over the credit crunch (and) less than soothing noises from the Fed (US Federal Reserve)," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers. "Normally, I'm quite a bull of the market but I'm struggling to see too many positives at the moment - clearly there is a wall of cash out there but there are not too many people prepared to commit large sums of capital to the market given this uncertainty "The traditional Santa Claus rally may well take a breather Verb 1. take a breather - take a short break from one's activities in order to relax catch one's breath, rest, breathe intermit, pause, break - cease an action temporarily; "We pause for station identification"; "let's break for lunch" this year." The credit crunch doesn't seem to be affecting A&L at a local level too much at the moment. In August, its Commercial Bank's Merseyside business centre reported lending had more than doubled in the past year. tonymcdonough@dailypost.co.uk Atone point, the bank's shares were down more than 5% |
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