£7.6bn hangover at Lloyds after Irish losses rocket
LLOYDS Banking Group is nursing a £7.6bn (€9bn) hangover from its Bank of Scotland (Ireland) adventure after losses at the Irish division rocketed in recent months.
The massive losses at Lloyds emerged yesterday just hours after National Irish Bank (NIB) boss Andrew Healy told analysts there was "no guarantee" impairment charges would fall in 2011.
"The property market in Ireland remains in very poor shape," Mr Healy said on a conference call, adding that the austerity measures recently announced "will not help" the situation.
Lloyds's statement also honed in on the austerity measures, claiming they were "negatively affecting" market sentiment because of fears the cuts could blunt economic growth.
"We are concerned that any economic recovery in the Republic of Ireland may take longer to achieve, and that asset prices will remain depressed for longer than previously anticipated," Lloyds said.
That prediction prompted Lloyds to increase its Irish loan loss provisions from £1.557bn at the half-year point to £4.3bn.
The figures imply the rate of loan loss almost doubled in the second half of the year. "Since the release of our interim management statement on November 2, the group has seen a further significant deterioration in market conditions in the Republic of Ireland," Lloyds said.
Lloyds's cumulative provisions on its Irish portfolio now stand at £7.6bn, or about 27pc of the group's £27.6bn Irish loan book.
The business is already in run-off, with the Halifax retail network shutting in February and the business banking division due to close at the end of the year.
Meanwhile, the Danish owners of the smaller NIB insist they remain fully committed to the Irish unit which has just completed an extensive restructuring programme.
NIB's latest figures show losses narrowed slightly to €468m for the nine months to September as loan impairments came in at €504m.
While impairments were expected to "remain high" in 2011, Mr Healy said he did not expect the "spike" in the second quarter of 2010 to be repeated.
The bulk of NIB's impairments have been on its commercial property loan. Despite the troubled backdrop, Mr Healy said NIB saw "opportunities in Ireland's "radically changed market".