Lloyds warns of potential £10bn loss at HBOS
Lloyds Banking Group shares took a pounding on Friday after it warned of multi billion pound losses at HBOS, the bank it rescued last September.
Shares in Lloyds, which is 43% owned by the taxpayer, plummeted 40% within a few minutes of the news being announced, but recovered slightly to close at 61.4p.
Chief executive Eric Daniels revealed that the crisis-torn HBOS arm of Lloyds Banking Group is expecting to report a loss of £10 billion for 2008, £1.6 billion more than it predicted late last year.
The majority of the HBOS losses are blamed on £7 billion worth of write-downs at its corporate division, which is heavily exposed to the housing and commercial property sectors.
Lloyds TSB has long been one of Britain’s best performing banks and was relatively unscathed by the credit crisis.
The Government encouraged the takeover of HBOS, following the demise of US investment bank, Lehman Brothers.
The group is set to announce its results later this month.
In the meantime, according to a report in the Sunday Telegraph, Lloyds Banking Group is planning staff bonuses of up to £120 million, despite being bailed out by the taxpayer to the tune of £17 billion.
Bonus packages have sparked outrage among the public when it is banks who are being blamed for the recession.
Chancellor Alistair Darling announced that an inquiry is to take place into the operations of banks after it was revealed that banks are planning large bonuses for its staff.
Lloyds defended the bonuses and said its employees deserved ‘financial recognition’ for hitting targets’.
The bank added that many of its ‘branch colleagues earn just £17,000 a year and will get a bonus of less than £1,000′.
The report comes as Eric Daniels, the group chief executive of Lloyds Banking Group, last week told the Treasury Select Committee that he earned a “relatively modest £1 million a year“.
Finally, there is speculation that the Government may have to take a majority stake in Lloyds, or even nationalise it. However, Mr Darling has insisted that it is best for banks to remain in the private sector.