A&L enters buy-to-let market

Alliance & Leicester yesterday revealed it had enjoyed strong growth in its mortgage business this year, but stayed silent on whether it had received an approach from French bank Crédit Agricole.

Three weeks ago France's biggest high street bank admitted it was considering a bid for A&L, the former building society that is now Britain's seventh-largest bank, but said that it had not yet put any proposals to the UK group.

In a trading update, A&L revealed that its net mortgage lending jumped to £1.4bn in the first quarter of this year - four times the £350m notched up in the same period last year and representing a market share of 6.3%. It said that its mortgage asset quality "remains excellent" with the proportion of accounts in arrears lower than at the end of 2005.

In the coming weeks the bank will start offering buy-to-let mortgages - a sector it has previously shunned as too risky - and loans aimed at people with poor credit histories. Lehman Brothers is taking on the risk under a partnership agreement.

A&L has traditionally been one of the most cautious mortgage lenders, but said it would enter the market "in a prudent and responsible manner", targeting those with sizeable deposits.

Unsecured personal lending fell to £565m in the first quarter, compared with £890m a year earlier, reflecting the slowdown in consumer lending and a tightening of the bank's lending rules.

Sales of new current accounts in the first quarter of the year were "significantly higher" than in the same period last year.

A&L added that it expected the growth rate in the "impairment charge" - the new name for bad debt provisions - in the first half of 2006 to be slightly lower than for 2005.

"This looks like a good start to the year," Mark Thomas, analyst at Keefe, Bruyette & Woods, said in a note.

The shares rose during yesterday but closed down almost 1% at £11.54.