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The newly merged entity Lloyds Banking Group, formed through the all share acquisition of HBOS plc by Lloyds TSB, released a trading statement for the 12 months to 31 December 2008 this afternoon. The numbers were grim. Lloyds TSB reported a profit before tax of £1.3 billion, taking several one-off hits to its earnings, including £1.3 billion from market dislocation, £750 million for insurance volatility and £400 million for the Financial Services Compensation Scheme levy.
However, it was the numbers from newly acquired HBOS that made the worst reading. HBOS managed to chalk up a whopping loss before tax of £8.5 billion. Taking into account several goodwill impairment charges, losses on the sale of businesses and the impact of short term fluctuations, the total loss before tax is expected to be in the region of £10 billion. Impairment charges reported today relating to HBOS are £1.6 billion higher than forecast in November 2008 by Lloyds.
The group\'s Core Tier 1 capital ratio at the end of 2008 stood between 6-6.5% - significantly in excess of its regulatory requirements.
Eric Daniels, Group Chief Executive, Lloyds Banking Group, remained optimistic about the future:
\'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. These impairments primarily reflect the application of a more conservative recognition of risk and the further deterioration in the economic environment.
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. The Group will provide an update to the market on 27 February 2009, and is already making good progress in integrating the two businesses.\'
Shares in Lloyds Banking Group tanked 21% on the update.
However, it was the numbers from newly acquired HBOS that made the worst reading. HBOS managed to chalk up a whopping loss before tax of £8.5 billion. Taking into account several goodwill impairment charges, losses on the sale of businesses and the impact of short term fluctuations, the total loss before tax is expected to be in the region of £10 billion. Impairment charges reported today relating to HBOS are £1.6 billion higher than forecast in November 2008 by Lloyds.
The group\'s Core Tier 1 capital ratio at the end of 2008 stood between 6-6.5% - significantly in excess of its regulatory requirements.
Eric Daniels, Group Chief Executive, Lloyds Banking Group, remained optimistic about the future:
\'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. These impairments primarily reflect the application of a more conservative recognition of risk and the further deterioration in the economic environment.
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. The Group will provide an update to the market on 27 February 2009, and is already making good progress in integrating the two businesses.\'
Shares in Lloyds Banking Group tanked 21% on the update.
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