The Investment Column: A bumpy ride from A&L

SHAREHOLDERS in Alliance & Leicester could be forgiven for being a bit bemused by its volatile performance on the stock market. Yesterday its shares jumped 29.5p to 862p on the back of an upbeat announcement about mortgage business, having fallen 57.5p the previous day.

The shares have dipped in recent months as the market has become worried about the group's share of the mortgage market. Concerns surfaced after its rival Halifax warned three weeks ago it would struggle to recover business in the face of fierce competition from mutual lenders.

Peter White, A&L's chief executive, reassured investors to some extent by announcing that gross mortgage lending was ahead of the first quarter of 1997. But gross lending is not the whole story. Halifax's problem was its net lending figures. Customers waited for their flotation windfall and then got out. And A&L relies on mortgages for most of its earnings so is more vulnerable to a mortgage price war than most.

Panmure Gordon forecasts current-year earnings of 24.5p per share, putting A&L on a prospective p/e of 15. That is cheaper than Halifax on a prospective p/e of 16.5. But A&L's rating is still higher than banks such as Barclays - which doesn't have to rely so heavily on mortgages. Since floating, A&L's share price has risen sharply. Now would be a good time to take some profits.