A&L profit wiped out by writedown

By Steve Slater

LONDON (Reuters) - Alliance & Leicester ALLL.L, which is being taken over by Spain's Santander, said first-half profits were almost wiped out due to a 209 million pound hit to the value of risky assets and higher funding costs.

A&L, Britain's seventh-biggest listed bank, said on Friday it made a pretax profit for the six months to the end of June of 2 million pounds, down from 290 million a year before. The result was in line with analysts' expectations.

A&L last month agreed to a 1.3 billion pound takeover by Santander (SAN.MC) and said it expected the deal to be completed in or around October.

With an economic downturn and continuing market turbulence threatening A&L's valuation, the deal with Santander offered "stability and certainty", said David Bennett, A&L chief executive.

He declined to comment on whether the bank had received any other approaches, nor on the feedback from shareholders.

By 8:34 a.m. A&L shares were down 0.4 percent at 339 pence, the same price that Santander's offer is currently worth, including an 18p interim dividend. A&L shares have tracked Santander shares since the offer, showing that investors think a rival bid is unlikely.

"Ultimately, with little new here, the driver of price remains the Santander offer," said James Hutson, analyst at Keefe, Bruyette & Woods.

Santander, Europe's second-biggest bank, has long courted A&L and secured it at a knockdown price after an 80 percent collapse in A&L's share price in the year before the offer. Santander plans to merge A&L with its existing UK bank Abbey.