August 5, 2009

Lloyds reports sharp six-month losses

Lloyds Banking Group in Britain said escalating debt losses pushed the merged firm of Lloyds and HBOS to a loss of $6.7 billion in the first half of the year.

The banking group was the second nationalized bank to report losses this week. Northern Rock, fully nationalized, reported losses of $1.22 billion for the first six months of the year. Lloyds Banking Group, in contrast, is 43 percent owned by the government, The Times of London reported Wednesday.

Lloyds' Chief Executive Officer Eric Daniels said the first half of 2009 proved no less challenging, than 2008.

The decline in property prices had a significant impact, he said.

Lloyds also said that the merger with HBOS, which will include a loss of 8,800 jobs, was on target to reduce operating costs by $2.5 billion a year.

The Times said Lloyds group is protected from escalating losses through a government program.

The bank has, essentially, a $42 billion deductible on qualifying losses. When bank losses surpass that, the government will step in to cover 90 per cent of additional losses, the newspaper said.