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HBOS loss highlights problems for Lloyds
By Robert Barr |
February 28, 2009, Saturday
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Print Edition
Print Edition
LLOYDS Banking Group PLC yesterday reported that the recently acquired Halifax/Bank of Scotland lost 7.5 billion pounds (US$10.6 billion) in 2008 while Lloyds TSB profits shrank to 819 million pounds.
The expanded group said that it was still negotiating with the government on terms for insuring questionable assets and that it expected to post a loss for 2009.
Lloyds TSB's reported profit of 819 million pounds was down 75 percent from 3.29 billion pounds in 2007. Revenue was down 8 percent to 9.87 billion pounds.
The HBOS full-year loss of 7.5 billion pounds compared to a profit of 4.05 billion in the previous year. Net interest income was up 12 percent to 8.2 billion pounds.
Results for the two companies were reported separately. Lloyds TSB acquired HBOS last month to become Lloyds Banking Group, which is 43 percent owned by the British government.
Shares in the group dropped 8.4 percent to 68.7 pence in early trading on the London Stock Exchange.
Alex Potter, banking analyst at Collins Stewart, said that he was "shocked" by HBOS' accelerating impairments but noted that the rate of loan impairments in Lloyds TSB was also deteriorating. He recommended that investors avoid Lloyds shares.
"We believe capital markets write-downs have peaked, so capital markets businesses will improve in 2009. However, the opposite is true of 'old-style' balance sheet banking; this bank's forte."
The expanded group said that it was still negotiating with the government on terms for insuring questionable assets and that it expected to post a loss for 2009.
Lloyds TSB's reported profit of 819 million pounds was down 75 percent from 3.29 billion pounds in 2007. Revenue was down 8 percent to 9.87 billion pounds.
The HBOS full-year loss of 7.5 billion pounds compared to a profit of 4.05 billion in the previous year. Net interest income was up 12 percent to 8.2 billion pounds.
Results for the two companies were reported separately. Lloyds TSB acquired HBOS last month to become Lloyds Banking Group, which is 43 percent owned by the British government.
Shares in the group dropped 8.4 percent to 68.7 pence in early trading on the London Stock Exchange.
Alex Potter, banking analyst at Collins Stewart, said that he was "shocked" by HBOS' accelerating impairments but noted that the rate of loan impairments in Lloyds TSB was also deteriorating. He recommended that investors avoid Lloyds shares.
"We believe capital markets write-downs have peaked, so capital markets businesses will improve in 2009. However, the opposite is true of 'old-style' balance sheet banking; this bank's forte."
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