Lloyds Blame HBOS for £4bn Losses
Apparently the LLoyds banking group has made a pre tax loss of £4billion in the first six months trading of this year. This is the result of Lloyds taking over HBOS where an unprecedented amount of risk taking led to its failure and ultimate bail out by the tax payer.
I bet LLoyds wish they hadn’t bothered now. More interestingly if the bad debts of HBOS are stripped out, LLyods would have made a operating profit of £6bn. It makes you wonder what sort of cretins were running HBOS so that £10bn of bad debts have effectively been written off in the first 6 months of this year.
The outlook is that LLoyds will right of more bad debts in the second half of this year, but thankfully not as many. The long term outlook is that LLoyds are predicting a recovery in 2010.
Up until the credit crunch we saw many risky deals being done not only by HBOS but by other prime lenders as well. Not only were these deals being done in the traditional banking sector, very risky deals were being done on equipment finance. We were seeing some hire purchase and finance lease deals being agreed which in our opinion it would be unlikely a second or third tier funder would approve.
Not only that, once a deal was agreed no account of the risk was taken into consideration and the deals were being priced too cheaply. Bank and asset finance is a risk reward business and financial institutions have an obligation to balance their portfolio in terms of risk and pricing. It appears the banks have learnt their lesson and for the time being rates will continue to be priced accordingly.