Alliance & Leicester has posted first-half pre-tax profits of just £2 million, a 99 per cent fall on a year ago amid the credit crunch.

The bank, which is being taken over by Spain's Santander, said first-half profits - which were £290 million for the same period last year - were almost wiped out due to a £209 million hit to the value of risky assets and higher funding costs.

A&L said it had been hit by losses on investments hurt by the credit crisis and soaring funding costs in crippled wholesale money markets.

The result for Britain's seventh-biggest listed bank is in line with analysts' expectations.

A&L, which last month agreed to a £1.26 billion takeover by Santander, said the value of certain treasury investments fell by £66 million and the impairment of other assets cost £143 million. It also took a £70 million hit from higher funding costs.

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