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Last Updated: Thursday, 29 November 2007, 20:45 GMT
UK banks in bid to calm investors
Bradford & Bingley branch front
Bradford & Bingley said it was set to meet profit forecasts
Two British mortgage lenders have moved to reassure investors over their prospects amid the global credit crunch and problems at Northern Rock.

Alliance and Leicester shares ended 8% up after it said it maintained strong assets and growth, despite taking a 55m hit on Treasury investments.

Meanwhile Bradford and Bingley said it was on track to meet profit forecasts and was coping with tough conditions.

Analysts have raised fears that both banks may have struggled to raise cash.

'Unprecedented conditions'

In the wake of the credit crunch, interbank lending markets have virtually ground to a halt, hurting some lenders.

In extraordinarily challenging conditions in credit markets, they have succeeded in securing requisite funds from commercial sources
Robert Peston
BBC Business Editor

The highest profile victim was Northern Rock, which has been granted about 25bn in emergency loans by the Bank of England after being unable to borrow money on the wholesale markets.

Separately. smaller buy-to-let specialist Paragon warned earlier this month that it was having difficulty restructuring its debts.

BBC business editor Robert Peston said that Alliance and Leicester and Bradford and Bingley were "the banks perceived by regulators and markets as most vulnerable to a hysteria-induced run caused by the debacle at Northern Rock in mid September".

"In extraordinarily challenging conditions in credit markets, they have succeeded in securing requisite funds from commercial sources," he added.

Alliance and Leicester said that it had maintained strong assets and growth despite "unprecedented conditions" in financial markets - allaying concerns it faces a financing crunch.

The group's shares were up 9.91% at 698.5 pence after it issued its statement.

Specialist mortgage lender Bradford and Bingley added that it had enough funding to see it through to the end of next year.

"We have taken the view that we should take our funding when we can and we got in some early funding deals when the windows were open, so we are padded up for the long haul," the bank's chief executive Steven Cranshaw said.

The problems in the world's credit markets were triggered by record default rates in the US sub-prime mortgage sector.

This debt had been repackaged and sold to banks worldwide.

As some of the debt held by banks is of questionable value, it is hard for them to know how much of their reserves they can afford to lend to other banks and also whether other banks are creditworthy.

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