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Lloyds takes extra €1.2bn hit from losses at its Irish arm

LLOYDS Banking Group delivered a downbeat assessment of the Irish banking and property markets yesterday by putting aside another €1.2bn to mop up losses on its Irish loan book.

While the loan book is gradually being run down by a team of local managers, the group was forced to take an impairment charge of €1.2bn to deal with the continuing fallout.

It also predicted commercial real estate in Ireland will fall by another 10pc.

The gloom surrounding the bank's operations in Ireland was cited as a key reason behind an overall £2.6bn group impairment charge.

Lloyds, which is partly controlled by the UK government, owned the Bank of Scotland and HBOS brands in Ireland, but neither are high street names here anymore as the group effectively leaves the Irish market after suffering huge losses due to commercial property lending.

The Irish arm has received billions of euro in capital over the last two years to shore up its regulatory reserves.

In one famous report it was suggested Lloyds and Royal Bank of Scotland had spent more money capitalising their Irish units than Britain spent fighting a war in Afghanistan in a single year.

Lloyds also said Ireland had contributed towards its general difficulties of impaired loans.

"Impaired loans increased by 3pc to £66.3bn, representing 11pc of closing advances, principally driven by a further increase in impaired loans in Ireland,'' said the bank in a trading statement covering the first quarter of this year.

It said its overall performance in the quarter was satisfactory. "In the first quarter of 2011, the group delivered a satisfactory trading performance on a combined businesses basis, given the subdued UK economic environment and risk reduction initiatives, with a profit before tax on a combined businesses basis of £284m, compared to a profit before tax of £1,104m in Q1 2010,'' said the statement.

Irish Independent