Alliance & Leicester Santander deal boasts banks sector on 100 Mortgages

The news that Alliance & Leicester is to be bought by Abbey-owner Santander seems to have given a psychological boost to the banks sector; however the reason behind the quick buyout is very worrying.

A&L who have 5.5 million customers realise that the credit crisis is going to get a lot worse, so this deal was vital to them to help secure their business. Chief executive David Bennett has said that “There is considerable uncertainty and the outlook is likely to continue to remain turbulent.”

The former building society insists that they have no black holes and was under no pressure to sell their bank to raise extra equity. However one thing is certain, if they decided to do nothing then it would not have been long before they would have been forced to sell.

According to This is Money, A&L currently has £23bn of customer deposits and savings however; the bank has loaned out £43bn in mortgages, so some quick cash was needed. Since the news of the Santander deal, A&L shares jumped 115¾p to 335p.

We know that Santander are offering just £1.3bn for Alliance & Leicester, this is just a drop in the ocean for the Spanish bank. However; Santander will now have to put its weight behind A&L’s mortgage books.

So one question remains, who will Santander try to buyout next.

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