Page last updated at 18:14 GMT, Friday, 27 February 2009

Lloyds sees HBOS loss of 10.8bn

Branch of HBOS' Halifax
HBOS, which owns Halifax, merged with Lloyds in January

Lloyds Banking Group has said that HBOS, which it absorbed in January, made a pre-tax loss of 10.8bn in 2008.

Meanwhile, 2008 profits at Lloyds TSB fell by 80% to 807m, which it described as "resilient". Shares in Lloyds fell 22% on Friday.

Lloyds also said it was in talks with the Treasury about placing toxic assets in the government's new asset protection insurance scheme.

It is 43% owned by the taxpayer which has provided 17bn in support so far.

Shares in Lloyds ended the day down 16.70 pence at 58.30p.

Cost savings

The banking group said it faced another "challenging year" in 2009.

The huge losses announced by Lloyds Banking Group further illustrate the dire straits in which the financial system finds itself
Derek Simpson, joint leader of union Unite

Eric Daniels, Lloyds Banking Group chief executive, said more than 100m in cost savings had been identified.

He said there would be some staffing reductions, but that most of those were expected to be achieved through natural turnover and voluntary retirement plans.

Lloyds said talks with the UK government on an asset insurance scheme "are progressing and are well advanced", and Mr Daniels said he would provide an update "reasonably shortly".

It had been expected to reveal it was placing more than 250bn of assets into the plan.

Lloyds now has a bad case of indigestion

"They haven't managed to conclude a deal on asset protection, and we think the uncertainty will lead to disappointment," said Simon Willis, an analyst at NCB Stockbrokers.

Shares in Lloyds Group were down 14% at 64.50 pence in morning trade in London.

'Excellent brands'

HBOS was hit by 9.9bn of losses on bad loans.

Bank profits and salaries should be capped, and banks should focus on service
Michael, Brentwood

At Lloyds, losses caused by "market dislocation", the slowdown in the UK economy, and the impact of falling house prices, came to 3bn.

Referring to its takeover of HBOS, which was completed in January, Lloyds said that it had "acquired a franchise that brings extensive distribution, a large customer base, good people and excellent brands".

When the deal was originally announced in September, the government backed the move using a special national interest clause, on the grounds that a collapse of HBOS would have had a disastrous impact on the UK.

This got around any potential anti-competition objection.

The new Lloyds Banking Group controls about 25% of British customers' personal bank accounts and about 28% of the mortgage market.

Sector-wide woes

It comes a day after Royal Bank of Scotland revealed a record UK loss of 24.1bn and a new bail-out worth up to 25.5bn.

Gordon Brown: 'My first priority has been to protect the savers'

Chris Skinner, an independent banking analyst and chairman of the Financial Services club, said: "At least they [Lloyds] made a profit, which is better than the Royal Bank of Scotland."

"We know the short-term outlook for the enlarged group is challenging," said Lloyds chairman Sir Victor Blank.

"Whenever economic conditions do begin to normalise, however, we believe we will be in a very strong position to reap the benefits."

Lloyds' five executive directors have all voluntarily agreed to forego any bonus they may be awarded for 2008.

"The huge losses announced by Lloyds Banking Group further illustrate the dire straits in which the financial system finds itself," said Derek Simpson, joint leader of union Unite.

"More than ever, it is essential that the new Lloyds Banking Group retains and protects its hard working staff."

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