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Lloyds reports HBOS losses of £10bn

Lloyds Banking Group has revealed its HBOS arm lost £10bn over 2008.

Lloyds TSB made profits of £1.3bn, after more than £1bn of write-downs, but it is HBOS that will hit the Group hardest with losses of £8.5bn and write-downs of a further £1.5bn.

The Group says the HBOS impairments are, principally as a result of applying a more conservative provisioning methodology consistent with that used by Lloyds TSB, and reflecting the acceleration in the deterioration in the economy, some £1.6bn higher than Lloyds’ expectations when it issued a shareholder circular at the beginning of November 2008.

Parts of the write-downs include £600m owed the FSCS for levies, and include £850m lost when the HBOS business was sold.

The Group estimates its core tier 1 capital ratio at 31 December 2008 will be within the range of 6.0 – 6.5 per cent, which is significantly in excess of its regulatory capital requirements.

Lloyds Banking Group chief executive Eric Daniels says: “HBOS’s 2008 results have been adversely affected by the impact of market dislocation, which accelerated significantly in the last quarter of 2008, and the additional impairments required on the HBOS corporate lending portfolios.

“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.”

As of 2:15pm, Lloyds shares are down 39.6 per cent to 54.9p.

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