Published February 14, 2009

£8.5b loss at HBOS sinks Lloyds shares

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(London)

LLOYDS Banking Group said that its HBOS unit made a hefty loss last year due to bigger-than- expected bad loans, wiping nearly a third off the group's stock market value.

HBOS had a pretax loss of £8.5 billion (S$18.4 billion) for 2008, Lloyds said in a statement yesterday, driven by £7 billion in bad corporate loans and a further £4 billion in asset write-downs.

In November, HBOS had estimated its corporate impairments at just £3.3 billion.

By 1452 GMT, Lloyds Banking Group shares were down 29 per cent at 64.8 pence, having earlier fallen as low as 54.9 pence.

'The market doesn't like the fact that in a period of a month, the corporate losses (at HBOS) are twice what they had announced,' said Mamoun Tazi, an analyst at MF Global.

Lloyds said that the big rise in bad loans and write-downs was driven by falling asset values as markets continued to deteriorate.

It said that the increase also reflected the application of Lloyds own 'more conservative' accounting methods at HBOS since the two banks joined forces late last year.

Lloyds Banking Group's Lloyds TSB unit made a profit of about £1.3 billion, the company said, including write-downs of about £1.3 billion. -- Reuters