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Lloyds TSB in no rights issue rush

Lloyds TSB has moved to reassure the market that it has robust capital ratios and a strong liquidity and funding position in its Interim Management Statement issued today.

The message from the bank suggests it is no rush to follow its rivals, Royal Bank of Scotland Group and HBOS, in launching a rights issue.

It says the impact of market dislocation on profit before tax in Wholesale and International Banking was £387m in the first quarter of 2008.

In the first quarter of 2008, Corporate Markets saw a reduction in profit before tax of approximately £278m as a result of the impact on mark-to-market adjustments in the group’s trading portfolio, reflecting the market-wide repricing of liquidity and , to a lesser extent, credit.

At 31 March 2008, the trading portfolio contained £200m of indirect exposure to US sub-prime mortgages and ABS CDOs.

Lloyds TSB says it significantly improved its market share of net new mortgage lending in the first quarter of 2008.

It says that recent levels of mortgage allocations continue to be strong.

Group chief executive Eric Daniels says: ‘Despite the more challenging market conditions, the Group remains firmly on track to deliver a good performance for the first half of 2008, excluding the impact of market dislocation and insurance related volatility. Our strong liquidity and funding capability have ensured that the Group has continued to raise wholesale funding at market leading rates.

“This gives the Group a competitive advantage and has enabled our corporate and retail relationship banking businesses to achieve strong levels of business growth in the first quarter of the year, capturing market share in a number of key areas whilst improving product margins. Our strategy and focus remains on continuing to build strong customer relationships, whilst improving the efficiency and effectiveness of our operations.

Daniels adds: “Excluding the impact of market dislocation and insurance related volatility, each division and the Group delivered double-digit profit before tax growth in the first quarter of 2008. By focusing on our core strengths and continuing to capture the growth opportunities within our relationship businesses, we expect to continue to deliver good levels of growth with high returns.”


Full circle

Five or six years go, I attended an Aifa dinner where the main speaker was Sir Howard Davies, then chairman of the FSA.

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