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Update sends Lloyds shares diving Update sends Lloyds shares diving
(10 minutes later)
Shares in Lloyds Banking Group, the company formed after the merger with HBOS, have fallen sharply following a trading update.Shares in Lloyds Banking Group, the company formed after the merger with HBOS, have fallen sharply following a trading update.
The bank announced that it expected HBOS to report a pre-tax loss for the whole of 2008 of £10bn, which is £1.6bn more than it predicted in November.The bank announced that it expected HBOS to report a pre-tax loss for the whole of 2008 of £10bn, which is £1.6bn more than it predicted in November.
Lloyds shares initially fell by as much as 40% before recovering somewhat to trade down 20%.Lloyds shares initially fell by as much as 40% before recovering somewhat to trade down 20%.
The Lloyds side of the business is expected to make a profit of £1.3bn.The Lloyds side of the business is expected to make a profit of £1.3bn.
'Challenging'
Most of the losses of HBOS are blamed on a £7bn write-down at its corporate division, which is heavily exposed to the housing and commercial property sectors.Most of the losses of HBOS are blamed on a £7bn write-down at its corporate division, which is heavily exposed to the housing and commercial property sectors.
Lloyds Banking Group is 43% owned by the government.Lloyds Banking Group is 43% owned by the government.
HBOS made a profit of £5.7bn in 2007.
Its chief executive Eric Daniels blamed the problems on "market dislocation", but stressed the longer term prospects of the business.
"Whilst we recognise that the short term outlook is more challenging, Lloyds Banking Group has the largest UK financial services franchise, with excellent long-term earnings potential," he said.