Lloyds losses hit £10 billion
Lloyds Banking Group has confirmed that HBOS made losses of over £10 billion in 2008, while Lloyds TSB saw its profits dive by 80%.
The group, which was established after the merger between Lloyds TSB and HBOS and is 43% owned by the Treasury, says the losses are mainly the result of bad debt. It has yet to announce its participation in the government's Asset Protection Scheme, but commentators expect confirmation soon.
Lloyds says it is currently in talks with the government over insuring some of its riskiest assets but that a final decision had yet to made. It was expected to announce that it was placing more than £250 billion of assets into the scheme.
Pre-tax losses for the year hit £10.8 billion at HBOS, mainly due to £9.9 billion of losses on bad loans, up from £2 billion the previous year. Much of the bad debt came from HBOS' corporate lending arm where impairment charges soared to £6.6 billion after Lloyds took a more conservative view of the HBOS lending book. Bad debts as a proportion of its loans climbed to 11.9%.
Meanwhile, the Lloyds TSB arm of the business suffered an 80% drop in profits to £807 million as impairment charges soared to £3 billion. However, the figure came in well below the £1.3 billion expected by the market.
Sir Victor Blank, chairman of Lloyds TSB, warns that the bank faces another trying year in 2009. "Against a backdrop of recession and an ongoing global financial crisis, we expect 2009 to be another challenging year," he told investors.
He also warned that some jobs could be axed following the £1.5 billion cost-cutting scheme implemented after the merger - although he hopes the majority of these will come from natural staff turnover or voluntary redundancy.