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Lloyds is £10bn in the red thanks to toxic HBOS
Jonathan Prynn27 Feb 2009
State-backed Lloyds Banking Group today unveiled a £10 billion loss as it warned of a huge rise in bad debts this year.
But the high street lender — the result of a hurried merger between Lloyds TSB and HBOS last autumn — alarmed the City by failing to agree a deal with the Government about a guarantee for its hundreds of billions of toxic debts.
While Lloyds made a pre-tax profit of £807 million in 2008, down 80 per cent, HBOS fell £10.8 billion into the red. Chief executive Eric Daniels said Lloyds profits were ravaged by “the most severe downturn since the 1930s”.
The loss follows Royal Bank of Scotland's record £24.1 billion deficit announced yesterday.
The combined losses of the two state supported banks last year were more than the entire GDP of Uruguay and meant they were haemorrhaging more than £1,000 of shareholders' and taxpayers' money every second. The two banks have already received or been offered more than £63 billion of taxpayer support, a total almost certain to rise.
The Government owns 43 per cent of Lloyds Banking Group, but this is likely to increase under the terms of any guarantees in the Treasury's Asset Protection Scheme.
The City hoped an agreement would be in place by this morning, allowing Lloyds Banking Group to “dump” the worst of its toxic loans and helping it to ramp up its lending to families and businesses, but in a statement the bank said talks had not been finalised — although they were “progressing and well-advanced”.
Bank analysts believe Lloyds will seek guarantees for up to £250 billion of loans, compared with the £325 billion agreed with Royal Bank of Scotland yesterday.
Finance director Tim Tookey warned that the merged bank would make another loss in 2009, which he said would be “another difficult year”.
He said bad debts would “rise significantly in 2009, largely reflecting the expected increase in unemployment levels in the UK and the impact of further house price falls”.
Mr Daniels said the bank had identified more than £100 million in cost savings, but would not give any details of the number of jobs likely to go or where the axe would fall.
Derek Simpson, Unite joint-general secretary, said: “The huge losses announced today by Lloyds Banking Group further illustrate the dire straits in which the financial system finds itself.
“Already in the last few months many employees have lost financial security as the value of their hard-earned shares have been wiped out.
Unite members working in the Lloyds Banking Group must now be given assurances that they will not pay further for the mistakes of the senior bankers which made the acquisition of HBOS necessary.
“We will oppose any compulsory redundancies or offshoring of UK jobs from the bank.”
Lloyds Banking Group was created during the banking crisis last September when HBOS appeared to be heading for collapse as a result of the credit crunch.
The deal by-passed the normal anti-competition inquiries on grounds that HBOS's failure would have a disastrous impact on the economy.
HBOS got into difficulties partly because of its gung-ho lending to property companies. Today it revealed it had to write off almost £6.7 billion of corporate loans, mainly to customers in the property industry.
Reader views (3)
Whilst ever British corporate law allows directors and company heads to set salaries, bonuses, perks and pensions, and disallows shareholders any say in such matters, nothing will change and shareholders and the country will continue to be robbed and pillaged. These cretins make the King John and the Sheriff of Nottingham look like the worlds greatest philanthopists.
- Len, Perth, Australia, 01/03/2009 10:13
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Nice work, "Harmonyfuture"! Well done for providing the BNP with a platform. Either you know what you are doing or you don't - either way your ghastly petition is utterly chilling.
- Frank, Home Counties, 01/03/2009 00:06
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Banks have given up on their international liabilities and now have turned their sights on the domestic market. Too late possibly. Please consider this proposal
Don't vote Labour
Don't vote Conservative
Don't vote Liberal
Vote for CHANGE
We the undersigned wish to register our support for a
VOTE OF NO CONFIDENCE in our current Government.
In these difficult times we feel that our and indeed the Nations interests would be best served by the formation of a NATIONAL GOVERNMENT, drawing on a multi party list of candidates to form a CABINET. We would seek from this new administration 4 main tasks.
1. Clarification of the true nature of the financial risks to our Country and
economy and a cohesive strategy for tackling them.
2. The setting up of a peoples elected COMMISSION to investigate the roles of
Banks and Government in this crisis.
3. The implementation of a fairer and more representative form of elections.
4. A review of Legislation which has been abused, misused or is otherwise
contrary to our Democracy.
http://www.gopetition.co.uk/online/25648.html
- Harmonyfuture, Stow-on-the-Wold UK, 28/02/2009 12:06
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