Lloyds blames HBOS merger for losses

Wednesday, 5 August 2009 12:00 AM

By Liz Stephens

Lloyds Banking Group announced a loss of £4 billion in the first six months of this year after writing down the value of assets from HBOS that were worth even less than it previously thought.

Lloyds is currently insured by the government under the Asset Protection Scheme but the further losses may mean the government takes an even larger stake in the bank.

The bank said it expected its results to start to improve in the coming months.

Lloyds is the biggest retail bank in the UK but is 43 per cent owned by the taxpayer after it went £13.4 billion into the red, mainly for bad loans following a merger with HBOS.

Former chairman of Lloyds Sir Victor Blank was allegedly persuaded to clear the way for a merger with HBOS after having dinner with Gordon Brown at Chequers.

Despite competition issues the Lloyds Banking Group was formed but it was later revealed that Sir Victor and his executives had little idea how much trouble HBOS was in.

Chief executive Eric Daniels later confessed to a parliamentary select committee that Lloyds did not carry out a full due diligence investigation before doing the deal.

Speaking today about the bank's losses Mr Daniels said: "Our first half loss was driven by the high levels of impairment.

"Overall impairments in the second half of 2009 are expected to be significantly lower than the first half with progressive reductions thereafter".

But SNP Treasury spokesperson Stewart Hosie said: "The black horse bank is up to its ears in the red - and we must hope that the level of these staggering debts has peaked and results will improve in the months ahead.

"Lloyds blame HBOS for dragging it down, and it is quite clear that Gordon Brown sold the country a con with his cut and shut merger of the two banks.

Shadow chancellor George Osborne also criticised the government's handling of the banking crisis saying: "When it comes to banking this Government offers no leadership, no strategy, and no plan."

Meanwhile, Liberal Democrat Treasury spokesman, Vince Cable said: "This news comes as no surprise. We knew that Lloyds was opening a can of worms when it took over HBOS.

"The real issue we now face is why banks aren't lending."

The news comes just a day after another state-owned bank, Northern Rock, announced its losses had grown by 24 per cent.

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