Concerns over UK banks' exposure to the US sub-prime mortgage crisis intensified today after Alliance & Leicester (A&L) laid bare the contents of its £18.9 billion treasury portfolio.

The bank, the UK's sixth-largest mortgage lender, has invested about £390 million in a variety of structured investment vehicles (SIVs), although it said that only a small proportion was exposed to potential losses.

However, the level of A&L's investments in highly structured credit vehicles took some analysts by surprise.

James Hutson and Mark Phin at Keefe, Bruyette & Woods, said: "This could be a genuine A&L trying to be 'whiter than white', but it may raise a few eyebrows over the conduct of the treasury (wholesale) division in what is essentially a mortgage bank.

"However, it does conclude by saying that its current positions and the current market liquidity issues have had 'no material impact' on profits or growth."

In by far the most detailed disclosure by any British bank so far, A&L also said it was operating a "conduit" facility totally about £770 million, invested in a variety of structured credit assets, including collateralised debt obligations (CDOs) and collateralised loan obligations (CLOs).

Shares in A&L slipped 8p to £10.52 as the lender said its exposure to highly structured credit products containing US sub-prime mortgages was £175 million. It is understood that the bank believes its maximum potential loss on the exposure is about £85 million to £90 million.

A&L added: "Current conditions in the funding and liquidity markets have had no material impact on either profits or franchise growth."

Just a day after three-month lending on the interbank market rose to a 10-year high, A&L also said it had not been "materially impacted".

The bank's disclosure comes amid intense interest in the exposure of British banks to potential losses on US sub-prime investments after two months of turmoil in the credit markets.

It comes a week after Barclays was forced into a fire-fighting exercise in the wake of suggestions it could lose hundreds of millions. Barclays' reckones that the maximum loss that could be suffered by Barclays Capital, its investment banking arm, at the hands of SIVs it has structured, is about £75 million.

Standard & Poor's, the credit rating agency, reaffirmed A&L's credit rating, saying: "A&L's treasury investments include various kinds of structured credits.

"While under current market conditions the valuation of these investments could suffer under fair-value accounting, either through the income statement or directly to reserves, their overall credit quality remains very strong."

At the same time, Germany's Deutsche Bank admitted that credit turbulence had "inevitably affected" the bank, in particular in its sales and trading and corporate finance divisions, where debt capital is raised and traded on behalf of clients and the bank.

"Market corrections, triggered in part by the drying-up of liquidity have been significant and impacted market-to-market valuations in our trading books and leveraged loan book," Josef Ackermann, Deutsche Bank's chief executive, told a banking conference in Frankfurt.

Mr Ackermann said there were signs in recent days that liquidity was returning to the market, some parts of which have seized up. He maintained that raising funds "has not been a problem for Deutsche Bank in recent weeks".

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