Alliance & Leicester Plc (A&L) poached Alan Gillespie from Ulster Bank to take over as its chairman, as it attempts to stabilise in the face of a tough outlook, Reuters reports .
Gillespie, who will take up his new post in September, has extensive experience in retail, commercial and investment banking, including 14 years at Goldman Sachs in its corporate advisory and mergers & acquisition unit. That previous career helped revive speculation A&L under Gillespie could be taken over or join up with smaller UK lenders, helping lift the bank’s shares.
A&L’s previous chairman Derek Higgs died in April. Its shares have plunged 79% in the last year to a record low as its funding costs have jumped and its earnings have fallen amid the credit crunch and tough UK housing market.
It has long been regarded as vulnerable to a takeover, with France’s Credit Agricole, Spain’s Santander and its bigger UK rivals such as Lloyds TSB all rumoured to have cast an eye in recent years. Its market value has dipped to just under GBP 1 billion ($2 billion).
“With its distinctive brand and customer franchise and broadly diversified retail and commercial banking businesses, it is well positioned to face the challenging times in the banking industry,” says Gillespie.
A&L’s profits are expected to drop to GBP 195 million this year, less than half last year’s 399 million, based on a Reuters Estimates average of 15 forecasts. Higher funding costs and losses on risky assets will cut earnings, while revenue will be held back by reducing mortgage lending.