Alliance & Leicester Ups Share Buyback, Profits Rise

British bank Alliance & Leicester expects profits to rise this year and plans to double its share buyback programme after it narrowly beat expectations with a 7% rise in 2006 underlying it.

A&L said on Wednesday it planned to buy back up to 300 million pounds ($584.9 million) of shares this year -- after repurchasing 150 million pounds of shares last year -- helped by the move to Basel II regulation.

Under Basel II, which seeks to better align a banks' capital needs with risks, A&L will have a lower capital requirement.

Britain's eighth biggest listed bank also said it expects core operating profit to rise this year. Many analysts had predicted a dip in profits as the bank struggles to raise revenues and margins are pressured.

Shares in the bank were up 3.6% at the start of London trade, at 1,104 pence, off earlier highs of 1,114 pence.

Dresdner upgraded its rating on the shares to "add" from "hold", citing its better than expected 2006 results and an improving operational performance.

A&L reported a core operating profit in 2006 of 585 million pounds, up from 548 million pounds and just above an average forecast of 580 million, based on analysts polled by the bank.

Its statutory pretax profit rose 4% to 569 million pounds, above an average forecast of 562 million pounds, according to Reuters Estimates.

Bad Debt Stablizes

A stabilisation in its margins and charges for bad debts in the second half of the year helped the full-year performance, after both deteriorated in the first half of last year.

The net interest margin -- the difference between the interest charged to borrowers and paid to savers and a key driver of profits -- was 1.3% last year, down from 1.46% in 2005.

The bank said it expects its net interest margin to fall by less than 16 basis points this year.

The charge for bad debts was 105 million pounds in 2006, up 42% from 2005. It said it expected the unsecured personal loan impairment charge in 2007 to be lower than that for 2006.

A&L said it expects revenues this year to increase from 1.47 billion pounds reported for 2006 and it is targeting underlying earnings per share growth of at least the retail price index plus 9 percent by 2009.

It also aims to reduce the ratio of its costs to income to below 50% by 2010. The ratio improved to 53% last year from 55.2% in 2005.

It said this would result in some redundancies.