The ratings on Abbey National PLC (Abbey) reflect its strong U.K. mortgage and savings market position, good core business profitability, comparatively favorable efficiency, solid liquidity, and effective distribution networks. The current credit cycle is a challenge to management's efforts to reduce the risk profile of its wholesale bank. Abbey National PLC reported a pretax loss of £984 million for 2002. This was due to the weakening of its life operations, and persistent asset quality difficulties, particularly in the wholesale bank. Regulatory capital measures continue to show flexibility, with a group equity Tier 1 ratio of 6.4% at end-2002. Standard&Poor's considers that the regulatory capital ratios do not provide an accurate indication of Abbey's underlying capital strength, however. This
