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Bad debts of £24bn knock Lloyds Bad debts of £24bn knock Lloyds
(10 minutes later)
Lloyds Banking Group has announced it lost £24bn on bad loans in 2009, forcing the bank heavily into the red.Lloyds Banking Group has announced it lost £24bn on bad loans in 2009, forcing the bank heavily into the red.
The bank posted an operating loss of £6.3bn - slightly less than analysts had expected and less than the £6.7bn loss the group made in 2008.The bank posted an operating loss of £6.3bn - slightly less than analysts had expected and less than the £6.7bn loss the group made in 2008.
On a pre-tax profit basis, the group made a profit of £1bn.On a pre-tax profit basis, the group made a profit of £1bn.
The bank blamed the massive losses on commercial property loans made by Halifax Bank of Scotland (HBOS), which it took over at the start of last year.The bank blamed the massive losses on commercial property loans made by Halifax Bank of Scotland (HBOS), which it took over at the start of last year.
It said these "impairments" were 21% lower in the second half of 2009, and would continue to see a similar rate of improvement throughout this year.It said these "impairments" were 21% lower in the second half of 2009, and would continue to see a similar rate of improvement throughout this year.
Lloyds shares had lost more than 5% by late morning trading.Lloyds shares had lost more than 5% by late morning trading.
'Strong momentum''Strong momentum'
Despite the loss, the bank said total income rose by 12%, to £23.9bn, while costs fell by 5%.Despite the loss, the bank said total income rose by 12%, to £23.9bn, while costs fell by 5%.
I have very rarely encountered results as appallingly bad as those published by Lloyds this morning Robert Peston, BBC business editor Read Robert Peston's blog in fullI have very rarely encountered results as appallingly bad as those published by Lloyds this morning Robert Peston, BBC business editor Read Robert Peston's blog in full
It said it had "delivered a resilient trading performance against the backdrop of a marked slowdown in the UK economic environment and continued challenges in the financial markets".It said it had "delivered a resilient trading performance against the backdrop of a marked slowdown in the UK economic environment and continued challenges in the financial markets".
Looking forward, chief executive Eric Daniels said: "We are building strong earnings momentum and expect our performance to improve significantly in 2010 and beyond."Looking forward, chief executive Eric Daniels said: "We are building strong earnings momentum and expect our performance to improve significantly in 2010 and beyond."
Mr Daniels has declined to take his bonus entitlement of £2.3m for 2009.Mr Daniels has declined to take his bonus entitlement of £2.3m for 2009.
Lloyds took over Halifax Bank of Scotland (HBOS) in January last year.Lloyds took over Halifax Bank of Scotland (HBOS) in January last year.
LLOYDS BANKING GROUPLast updated: 26 Feb 2010, 11:43 UK *Chart shows local time pricechange%51.52p-3.38-6.16 More data on this share price LLOYDS BANKING GROUPLast updated: 26 Feb 2010, 11:53 UK *Chart shows local time pricechange%51.50p-3.40-6.19 More data on this share price
It underestimated how many bad loans HBOS had on its books, and had to be bailed out by the government as a result.It underestimated how many bad loans HBOS had on its books, and had to be bailed out by the government as a result.
The bank is now 41%-owned by the state, down from 43% after it raised £22.5bn of capital at the end of last year.The bank is now 41%-owned by the state, down from 43% after it raised £22.5bn of capital at the end of last year.
Mortgage lossesMortgage losses
Lloyds pinned the blame for its huge loan losses of £24bn firmly on reckless lending by the previous management at HBOS, and on the recession driving other customers out of business.Lloyds pinned the blame for its huge loan losses of £24bn firmly on reckless lending by the previous management at HBOS, and on the recession driving other customers out of business.
It also revealed the massive scale of further potential losses lurking on its books because borrowers are struggling to repay their loans.It also revealed the massive scale of further potential losses lurking on its books because borrowers are struggling to repay their loans.
What it described as "impaired loans and advances" more than doubled in value last year and stood at £58.8bn by the end of December - amounting to 9% of all its lending.What it described as "impaired loans and advances" more than doubled in value last year and stood at £58.8bn by the end of December - amounting to 9% of all its lending.
The bank said losses crystallised last year were mainly due to "falls in the value of commercial real estate and the impact of the economic deterioration during the year, including the effects of rising unemployment and reduced corporate cash flows".The bank said losses crystallised last year were mainly due to "falls in the value of commercial real estate and the impact of the economic deterioration during the year, including the effects of rising unemployment and reduced corporate cash flows".
In its High Street business, higher unemployment among customers pushed up losses on bad loans to £4.3bn, although losses on mortgages fell back as house prices recovered.In its High Street business, higher unemployment among customers pushed up losses on bad loans to £4.3bn, although losses on mortgages fell back as house prices recovered.
In corporate lending, losses rose to £15.7bn, particularly because of the crash in commercial property values and because of other firms going under.In corporate lending, losses rose to £15.7bn, particularly because of the crash in commercial property values and because of other firms going under.
Lloyds also lost large sums on commercial property loans in Ireland and Australia.Lloyds also lost large sums on commercial property loans in Ireland and Australia.
On Thursday, Royal Bank of Scotland (RBS), which is 84% government-owned, reported a pre-tax loss for 2009 of £3.6bn.On Thursday, Royal Bank of Scotland (RBS), which is 84% government-owned, reported a pre-tax loss for 2009 of £3.6bn.
Last week, Barclays reported pre-tax profits of £11.6bn, although the figure was boosted by the sale of its BGI fund management arm to US firm BlackRock last year.Last week, Barclays reported pre-tax profits of £11.6bn, although the figure was boosted by the sale of its BGI fund management arm to US firm BlackRock last year.