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Gloomy Lloyds Group results due Lloyds sees HBOS loss of £10.8bn
(about 7 hours later)
More bad news from the UK's banks is expected later when the Lloyds Banking Group posts its results for 2008. Lloyds Banking Group has said that HBOS, which it absorbed in January, made a pre-tax loss of £10.8bn in 2008.
Shares in Lloyds, which is 43% government-owned, fell sharply after a trading update revealed larger-than-expected losses at its subsidiary HBOS. Meanwhile, Lloyds TSB has seen its own profits for 2008 fall by 80% to £807m, in what is said was a "resilient underlying business performance".
Lloyds indicated it would make a £1.3bn profit, but warned investors that HBOS was likely to make a £10bn loss. Lloyds also said it was in talks with the Treasury about placing toxic assets in the government's new asset protection insurance scheme.
The company will also reveal how much of its toxic assets it will place in the government's new insurance scheme. And the banking group said it faced another "challenging year" in 2009.
Ill-judged 'Excellent brands'
The group's shares fell sharply after HBOS's expected losses were forecast, and the disclosure raised further questions about the wisdom of a takeover which had been encouraged by the prime minister. HBOS was hit by £9.9bn of losses on bad loans.
Concerns were also raised about whether Lloyds could need more funds or be nationalised, but ministers insisted they were not considering taking it into public ownership. 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
The government has already poured £17bn into the Lloyds Banking Group. At Lloyds, losses caused by "market dislocation", the slowdown in the UK economy, and the impact of falling house prices, came to £3bn.
Prime Minister Gordon Brown has insisted that limits will be agreed on staff bonuses. Referring to its takeover of HBOS, 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
The whole group is 43% owned by the taxpayer, and the government has already poured £17bn into the Lloyds Banking Group.
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.
"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.Lloyds' five executive directors have all voluntarily agreed to forego any bonus they may be awarded for 2008.
The announcement comes after the Royal Bank of Scotland posted a record corporate loss and confirmed it would inject some £325bn off ill-judged investments into the government's insurance scheme, which is intended to help stabilise the banks. "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."