The ratings on Abbey National PLC (Abbey) reflect its still good U.K. mortgage market position, large retail deposit base, relatively stable core business profitability, solid liquidity, and distribution network potential. The ratings are constrained by Abbey's weak core capitalization (on Standard&Poor's measures), execution risk inherent in the new management team's transformation plans (although the renewed focus on U.K. retail financial services should reduce risk over time), and by the likelihood of weak group profitability until this transformation is completed. Abbey reported a pretax loss of £984 million for 2002, and of £144 million for the first half of 2003. Initiatives to reduce Abbey's risk profile are proceeding ahead of schedule, but remain challenging, and future asset disposals will
