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Tuesday 17th of February 2009

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February 15, 2009

Lloyds Banking Group warns of £10bn loss for HBOS

by Gill Montia

Story link: Lloyds Banking Group warns of £10bn loss for HBOS

Lloyds Banking Group has reported that losses at its merger partner, HBOS, will be £1.6 billion higher than expected for 2008 because of worse than expected trading in December.

HBOS is therefore expected to post a loss of £10 billion for the year, with most of its troubles blamed on a £7 billion writedown at its corporate division, which is heavily exposed to the housing and commercial property sectors.

In presenting the trading update, the group’s chairman, Sir Victor Blank, referred to “the more conservative provisioning methodology used by Lloyds TSB which has been applied in this case”.

This could suggest that HBOS’s balance sheet was rose tinted at the time the merger was agreed.

The shotgun marriage between the banks was brokered by the Government during the October chaos that followed the collapse of Lehman Brothers.

The Government injected £17 billion into the deal, leaving the new Lloyds Banking Group over 40% state-owned.

The pre-merger Lloyds TSB was trading satisfactorily at that point, having been regarded as one of the few High Street Banks to be relatively unscathed by the credit crisis.

As a result, the group’s Lloyds TSB division expects to post a £1.3 billion pre-tax profit for 2008.

Shares in Lloyds Banking group fell 40% on Friday afternoon but recovered slightly to 60.9p.

 

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