News that Alliance & Leicester's losses from its credit market investments have rocketed to £185 million from £55 million during November and December, coupled with the indefinite departure for health reasons of its chief executive, was received badly on the stock market yesterday.

The mortgage bank had sought to reassure the City with a trading update announcing that it has secured funding to see it through to the end of this year, with agreements to replace or extend all its wholesale loans due to mature in the course of 2008. It reported, too, that customers' deposits - £23.4 billion belonging to retail savers and £8 billion from commercial customers - cover 56 per cent of all its loans and advances.

The market's initial response was euphoric. The shares ran more than two per cent higher early on, but later went sharply into reverse to finish 25p lighter on the day at 700p.

One factor in this change of mood was the absence of David Bennett, who arrived as chief executive only last July. A&L said he is suffering from an abdominal illness.

Chris Rhodes, finance director took over as acting chief executive yesterday. Sir Derek Higgs, chairman, said Mr Bennett is not expected back in the short term.

"We wish David well and look forward to welcoming him back fit and well in due course," Sir Derek added.

Mr Rhodes stressed that A&L's retail and commercial operations are performing well. Before the cost of writing down the credit market investments, A&L should still meet the earlier analysts' consensus of a full-year profit of £598 million, up from £585 million in 2006.

Ashley Stuart, an analyst at JP Morgan, commented: "In summary, this is clearly not good news, and a sign of what we could expect from the other UK banks as we go into earnings season."

A&L's shares have had a switchback ride in recent months. They fell back to 553p last November after touching a peak of 1210p earlier in the year. Their recovery in the last two months was helped by news that A&L had agreed a £4 billion two-year financing facility with Credit Suisse.

The £185 million write-down total announced consisted of £145 million from structured investment vehicles, £10 million related to collateralised debt obligations and the remaining £30 million from treasury investments.

A&L said the fair value of other CDOs it held had fallen by £147 million in 2007, reflected in its reserves.