The ratings on Abbey National PLC (Abbey) reflect its strong U.K. market position, good core business profitability, comparatively favorable efficiency, solid liquidity, and effective distribution networks. Abbey's diversification does provide some protection against tighter margins in traditional markets, but the current credit cycle is a challenge to management's efforts to reduce the risk profile of the wholesale bank. The group is likely to report a loss for 2002, given problems in its nontraditional activities. Regulatory capital measures continue to be good, with a group equity Tier 1 ratio of 7.0% at June 30, 2002, but these will fall at year-end 2002, because of the balance-sheet charges that will be taken in this period (however, these should be partly offset by
