While S&P stated that it had ‘no major concerns’ over the quality of A&L’s loan book, it warned that if the condition of the housing market and broader economy deteriorated faster than expected, the rating could come under pressure.
It added that its rating could be revised back to stable if the availability and cost of wholesale funding improved.
Nick Hill, credit analyst for S&P, said: “The outlook revision recognises the strategic constraints and pressure on both funding and earnings arising from renewed tightness in the interbank market, the resultant likely impact on margins and volume growth, and the likelihood of write-downs and impairments on investments in structured finance assets.
“The negative outlook recognises that S&P’s rating on A&L could be reduced if funding conditions do not improve early in 2008.”
Stuart Dawkins, director of corporate communications at A&L, commented: “S&P has every right to make what assessment it likes. It won’t affect our business.”
Mark Chilton, chief executive of Homeowners Mortgages, commented: “This could make it more expensive and difficult to raise money in the wholesale money market. I don’t think it will effectively stop A&L accessing money but it will make it more difficult. The market will not like it. But A&L is big enough and tough enough to trade through it.”
