Morning:
14°c
Banks rocked as Lloyds profits plummet by 70%
Ellen Widdup, Evening Standard30.07.08
Britain's banks were rocked today when Lloyds TSB reported a plunge in profits of £1.4 billion - a 70 per cent fall.
The result was far worse than a pessimistic City was expecting and raised fears for high street rivals.
HBOS, which owns Halifax, reports tomorrow and Alliance & Leicester the day after.
Lloyds TSB blamed the global credit crunch and losses in its insurance business. The figures will heighten government fears that more small banks could collapse like Northern Rock. Lloyds was regarded as the most conservative of the big banks and had won praise for resisting the temptation to make risky loans during the boom years.
Lloyds said it expected house prices to fall by up to 15 per cent this year, which would push tens of thousands of people into negative equity.
Banks have come under fire from consumer groups for squeezing customers with high charges as they themselves struggle with the downturn. Critics of the industry say not enough banking bosses have accepted responsibility for their failures by resigning.
Lloyds TSB chief executive Eric Daniels warned the British economy was facing a sharp slowdown in the coming months, and will grow by only 1.6 per cent this year - far lower than Treasury estimates of two per cent.
He said the crisis in the financial markets and falling house prices "have impacted consumer confidence and contributed to lower growth" in the last six months.
The bank made £599 million in the six months to June, down from almost £2 billion a year ago.
It said its performance reflected good "momentum". But the City is now fearful for the company. Simon Pilkington of Cazenove said: "We perceive a longterm challenge to the group's position."
Lloyds shares were the biggest faller in the FTSE this morning, down 19p at 302p, with HBOS falling 7p at 265¾p.
Reader views (6)
Bank are legalised thieves.
- A.B.Shaw, York UK
If all this makes houses worthless, then bring it on. I want to buy my house dirt cheap. I didn't get involved with this orgy of lend and spend. You reap what you sow.
- Np, Cornwall, UK (Until the food runs out)
Maybe the Banks need to get back to what they did best, and stop trying to hard-sell financial products to people least able to afford them. That way, there would be no credit crunches, no obscene bonuses, no rip-off banking charges and a British based customer contact centre staffed by human beings would make people warm to their Bank and faith would lead to sound financial status for many, although I agree, not for all.
- Joan, London, England
Whooppee! Let's get the short-selling rolling and the hedge funds charging and let's up the predatory trading and get some crowded exits going - and make a few millions!
- John Problem, Hackney Wick, London, UK
If any other FT-SE companies in sectors other than banking had gone headlong after high risk customers with unwise mortgage offers, or made investments in opaque projects lacking any transparency, they would have been unceremoniously fired as soon as the results of their work became clear. Instead of which, the board directors of the banks and companies involved in the global mortgage industry have continued to reward themselves with obscene bonuses, salary - and pension! - packages at the shareholders' expense, and only one of their number has resigned on, of all things, health grounds. None of the employees responsible for the creation and sales of the risky mortgages and who enjoyed the resulting performance (!) bonuses have been publicly fired. But the rest of us - consumers, companies, etc. - have to now go through the purgatory (aka credit crunch et al) resulting directly from their man-made errors and sheer incompetence.
Here's a suggestion to them: resign, pay back all those bonuses so that you no longer enjoy financial independence and security, and then see what it's like in the real world. You'd soon change your arrogant tone.
- Charles, UK
What a shame...
- Alan, Kent
