The bank said it was funded into the second quarter of 2009, but added the deteriorating value of its assets had cost it almost £400 million in the first four months of this year.

The figure on write-downs was bigger than expected in the City and caused shares in the FTSE 100 Index company to fall by more than 5 per cent.

A&L said operating profits without the write-downs would have been flat for the first four months of the year. It has slowed its business in line with the tougher market conditions, as mortgage balances for the first four months of the year were down 4 per cent to £41.2 billion.

It said its asset quality remained strong, with 2,650 of its 462,270 mortgage accounts being more than three months in arrears, an increase of 300 in the first four months and representing 0.57 per cent of all accounts.

A&L said there were no signs of stress in either its mortgage or unsecured personal loan portfolios, adding it expected its bad debt charge in the first half of 2008 to be slightly lower than the £50 million reported a year earlier.

Chief executive David Bennett said: "Alliance & Leicester has made good progress during the first four months of 2008."