LLoyds TSB a Crippled, Customer Hated Bank Declares £6.3 Billion Loss

Companies / UK Banking Feb 26, 2010 - 08:38 AM

Best Financial Markets Analysis Article The 41% tax payer owned Lloyds TSB bank continues to declare abysmal losses of £6.3 billion for 2009 against £6.7 billion for 2008 as a direct consequence of the HBOS cancer that continues to eat into the banks balance sheet. The balance sheet suffered a £24 billion bad loans impairment, against profits generated by the branches of £1.3 billion and against £20 billion of tax payer capital injected into the bank and a further £150 billion of tax payer loans and guarantees.

Unfortunately the current dire position of the bank is even amidst an atmosphere of near unlimited support for the banks and huge continuing capital injections, which does not bode well for the bank once the government and the Bank of England starts to withdraw this support, i.e. where is Lloyds TSB going to generate its profits from in the future? As £1.3 billion from the retail arm is a mere pittance when compared against the continuing bad debt losses as a consequence of the HBOS exploding mortgage book that will continue to generate more bad debt write offs for many more years.

Lloyds TSB is literally a crippled bank for which I do not even see casino capitalism coming to its rescue as we are observing with the likes of HSBC, Santandar, Barclays bank and even the 81% tax payer owned RBS who's investment banking arm can at least benefit from investment banking profits. A long slippery path lies ahead of Lloyds TSB towards profitability, the first step along which would be to extricate itself from the 41% government share holding, all of which means the battered and bruised Lloyds share holders should not hope for a turnaround to happen within the next few years, especially if the housing market turns down again as I expect it to do following the next general election, therefore shareholders will yet again be subject to calls for more capital that dilutes existing holdings.

LLoyds TSB along with RBS are abysmally failing to live up to their side of the bargain with the tax payer as they both contract lending to businesses and consumers as their loan books continue to shrink, the consequences of which is reflected in the slow pace of economic recovery. The bailed out bank has also been awarded in the inalienable title of being Britain's most hated bank as a consequence of a quarter of all complaints to the Financial Ombudsman being due to lack of competent service by Lloyds TSB / HBOS, after the banking group abandoned customer service standards in favour of jobs and cost cuts. All of which will have an impact the next general election as voters ask both major parties why did you let the bankster's get away with robbing the tax payers?

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By Nadeem Walayat

http://www.marketoracle.co.uk

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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Comments

Nikki Turner
01 Mar 10, 05:26

Can Lloyds ever recover from HBOS merger?

As the truth about HBOS is dragged kicking and screaming into the media (and goodness knows it has remained buried for a very long time), it brings with it some very uncomfortable questions.

1. Why did the Prime Minister allow the destruction of a perfectly good bank by making it merge with a totally rotten one?

2. Why did Eric Daniels agree to the merger?

The answer to the 2nd question has to be more than just a bad dose of megalomania and the desire to Empire build. And the answer to the 1st question should surely be the subject of a Public Enquiry.

Reading the excellent article in Rolling Stone by Matt Taibbi http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout_hustle/print I can't help thinking that many, if not all of the banking scams he lists, can be found hidden in the HBOS ledgers. In particular, it's possible that some very dodgy derivative deals could have been very detrimental to the Labour Government if the bank had gone down.

So maybe saving HBOS was all about saving the Government and both Lloyds Bank and the thousands of people who have lost out on the deal (I should say millions because the British public will be paying for bank bailouts for years to come one way or another) were simply collateral damage.

There's more bad news to come - the FSA are finally doing an investigation into the bizarre and scandalous HBOS Reading fraud. To date, this has been blamed on one rogue bank manager who was, according to the bank, over supportive to his customers. But that ridiculous story has been well and truly exposed as a total misrepresentation of the truth and journalist Ian Fraser has reported the true story repeatedly and with no action taken from the bank to deny it http://www.ianfraser.org/?p=910

What's so bad about this fraud, which is now estimated to have cost HBOS the better part of £1BN and from one office, is that both the Prime Minister and Lloyds senior executives, were fully cognisant of it, when they did the merger. And, rather than deal with it, they have simply buried their heads in the sand and pretended it didn't happen. The FSA however, can't afford that luxury. They have clear evidence of fraud and they will have to expose it - which will be another damning blow for Lloyds popularity.

HBOS Reading is, of course, just one of the HBOS scams. There are others and I wonder if Lloyds can recover when they all come out?

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