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Lloyds says 98pc of BoSI development loans will be lost

Published 25/02/2012 | 05:00

LLOYDS Banking Group has admitted it doesn't expect to get its money back on 98pc of development loans granted by its defunct Bank of Scotland Ireland (BoSI).

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The stark picture was revealed in Lloyds's full-year results, which also showed the bank took another £3.2bn (€3.77bn) of provisions for losses on its £24.7bn Irish loan book last year.

That £3.2bn was marginally down on 2010's tally, and Lloyds finance boss Timothy Tookey said he was "very pleased" that impairments had slowed in the commercial book in particular.

Chief risk officer Juan Colombas predicted that there would be "some improvement" in impairment charges this year, since the bank had taken "one- off" hits in 2011.

One of the most expansionary lenders in the boom, Lloyds pulled the shutters down on BoSI in late 2010. Its loans are now collected by Certus, a company set up by former BoSI managers.

Despite yesterday's upbeat commentary from Lloyds executives, the 2011 detailed results show the dramatic level of the bank's Irish losses and the troubled nature of its Irish portfolio.

Some 84pc of its £17.8bn commercial book is now classed as "impaired" -- meaning the bank doesn't expect to get back the full amount it loaned out.

The level of bad loans is worst in the £4.9bn "commercial development" book, where 98pc of all loans are described as "impaired". In commercial investment, impairments are running at 85pc, while "corporate and other" recorded a relatively healthy level of 74pc.

"You cannot impair more, right?" Mr Colombas told analysts yesterday, when quizzed about the potential for further Irish hits.

Mr Colombas also stressed that Lloyds had taken a proactive approach to facing up to losses on its impaired loans.

'Very bad book'

The bank has provided for loan losses equal to 61pc of the value of its impaired loans, a level of provisions Lloyds is "comfortable with" in light of a "very bad book" according to Mr Colombas.

"Lloyds appears to be the most aggressive institution in crystallising impairments on their loan portfolio; whether this is a strategy or a reflection of the quality of the loan portfolio is unclear," Goodbody's analyst Colm Foley said in a note to clients yesterday.

On the personal loans front, 20pc of Lloyds £7bn mortgages are now classed as "impaired", up from 15pc at the half-year point.

Arrears of more than three months are running at 18pc of the value of the book, up from 14pc at the end of last June.

"We think the overhang . . . on the property market will continue so we are not very optimistic [about the mortgages book]," Mr Colombas told analysts.

"We continue being very cautious."

Lloyds has taken provision for losses equal to about 70pc of its impaired mortgages' value, well above the norm for other banks. "The Lloyds experience in Ireland reflects some of our concerns over the potential for further deterioration in the loan portfolios at the Irish banks," NCB banking analyst Karl Goggin told clients.

On a more positive note, Mr Tookey said the bank had seen "some liquidity return" in the Irish market as it recovered more than £2bn last year from a combination of cash sales and capital repayments.

Irish Independent

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