Lloyds reports £4bn loss

The banking group, which is 43 per cent government owned, reported a pro-forma loss of £4bn for the first half of 2008, compared with a £2.8bn profit in the first half of 2008.

The group, which has been blighted by the acquisition of HBoS last year, saw its impairment costs rise to £13.4bn in first half of 2009, but expects impairments to have now peaked, reflecting "prudent valuation of HBoS's commercial property related assets".

In terms of mortgage business, the lending group said business performance was resilient despite margin pressures and the weak economy, allowing its gross mortgage lending to total £18bn.

This represents a 27 per cent share of the gross lending market and 37 per cent of net new lending.

The group also said its core tier one capital was at 6.3 per cent and wholesale funding had increased from 44 per cent to 47 per cent over the year.

Despite the losses, Lloyds said the integration of HBoS is ahead of schedule and on track to deliver over £1.5bn run rate by end 2011, as well as over £100m of cost synergies realised in the half of 2009.

It estimates annualised run-rate savings at around £700m by the year end.

Eric Daniels, group chief executive, said the significant deterioration in the UK economic environment over the last six months created an extremely challenging operating background against which to integrate two large banking organisations.

He said: "As expected, against this backdrop, the significant increase in corporate impairments has led the group to report a loss in the first half of the year.

"We have an excellent track record in cost management, with a unique opportunity to capture significant acquisition related synergies over the next few years.

"On impairments, we believe the group's overall impairment charge has now peaked, with a significant reduction expected in the impairment charge in the second half of 2009."

Looking ahead, the group expects the economy to stabilise, with a weak upturn in 2010, whilst anticipating making a loss before tax for 2009 due to continued pressure on margins.

Daniels added: "The group has a strong risk management culture and is well-placed to manage through the near term challenges and benefit from what we expect to be a slow but steady UK economic recovery from 2010 and beyond."

Yesterday (4 August), Northern Rock which was also nationalised by the government, reported a loss of £724m. (See article.)