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Lloyds: Back in the red?

Robert Peston | 19:04 UK time, Wednesday, 4 May 2011

It's the first results tomorrow for Lloyds new chief executive, Antonio Horta-Orsorio - and I wouldn't be at all surprised if, in the time-honoured fashion of new brooms, he announces substantial losses on ventures that had already gone a bit wrong for his predecessors.

In particular, I would expect him to announce further significant writedowns on £20bn odd of outstanding loans to the troubled Irish economy - after last year's impairment charge of £4.3bn on Irish lending.

Also, he may well make a provision of well over £1bn to cover potential payouts to thousands of purchasers of PPI loan insurance.

This would follow last month's comprehensive defeat in the courts of Britain's leading banks, which had challenged the decision of the regulator, the Financial Services Authority, that they should pay compensation for mis-selling of the credit insurance.

If Lloyds were to incur such a big loss on its past sales of PPI policies, that of course would be seen as a very good thing by those who believe that Lloyds mis-sold to them - because it would imply that Lloyds would be ceasing its legal battle (with the other banks) to avoid making comprehensive restitution.

Anyway, the Irish and PPI debits together could well run to many billions of pounds - which would be enough to put Lloyds into losses overall for the first three months of the year, and possibly for the first six months too.

That would be embarrassing for Lloyds, though not for Mr Horta-Orsorio, who can't be held responsible for decisions made before his time.

Remember that Lloyds made a big thing last year of being back in the black, following its humungous losses in 2008 and 2009 of £6.7bn and £6.3bn respectively.

Anyway, if I'm right, and if Lloyds takes a chunky hit from Ireland and PPI, it would represent a setback to the recovery of a bank 41% owned by taxpayers - but it wouldn't impair the health of the bank in a fundamental way.

That said, it would pose a very particular question for the non-executives of Lloyds - which is why they chose to award a £1.45m bonus to the bank's retiring chief executive, Eric Daniels, earlier this year.

Comments

  • Comment number 1.

    I'll just await the massive bonus payment announcement

  • Comment number 2.

    RP wrote:it would pose a very particular question for the non-executives of Lloyds - which is why they chose to award a £1.45m bonus to the bank's retiring chief executive, Eric Daniels, earlier this year.
    --------------------------------------------------------------------

    Robert, you know how it works (or does not work).

  • Comment number 3.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 4.

    Of course Lloyds are in the red. It is what banks do. They lend money out that they haven't got. If anybody complains then the government, us, carries the can.
    Meanwhile the banksters continue to fill their boots.
    As a business model it takes some beating.
    No focusing of the mind needed.
    No moral hazard.
    No need to make a success of things. Heck just operating means they get bonuses.
    Clever bankers.

  • Comment number 5.

    The non-executives of the big banks are a disgrace. Worse than that, they have completely got away with their negligence - at least I don't recall them being censured in any of the investigations into the financial collapse.

    Their job is to represent the bank's shareholders, and they have completely and utterly failed to do so.

  • Comment number 6.

    Bonuses when things go wrong and even more bonuses when things are not so bad. Robert you have no respect for top brass (should it not be top gold).

  • Comment number 7.

    I don't know why we're still surprised at the downright venality, incompetence and greed of bankers, supported, for heaven's sake, by our elected representatives. In any other set of circumstances it would be called collusion, if not corruption. They just don't get it, do they? The almost universal contempt in which they are held, when a "bonus" of £1.45m is considered quite normal. FYI, you'd have to work approximately 121 years to make that, were you on the current minimum wage.

  • Comment number 8.

    come to think of it, with their several billions of equities (cash?), these few men are richer than Greece, Ireland and Portugal put together!

  • Comment number 9.

    @#3 Jeff Lampert: "Santander has a reputation for being more ethical".

    They do, don't they?

    Not what I found when I worked for them.

  • Comment number 10.

    Hmm, looks like someone has been pre briefing the statement. Shouldn't all the shareholders be getting this information at the same time?

  • Comment number 11.

    God! When are you lot going to get over Bankers' bonuses? It's time to move on & get a life.

  • Comment number 12.

    #11, you're so right, people should move on and let these hard working bankers continue to make obscene bonuses when other are suffering pay cuts and job losses. Oh to lack a conscience or any sense of moral decency!

  • Comment number 13.

    That accounts for the Lloyds shareprice over the past week - why on earth is Daniel's not being sued?

  • Comment number 14.

    11. At 21:41pm 4th May 2011, cabelguy wrote:
    "God! When are you lot going to get over Bankers' bonuses? It's time to move on & get a life."

    I am sure Robert Peston has a very pleasant life. But I think Robert Peston wants to tell us that bankers have certain responsibilities, and if they can get massive bonuses when they missold PPI insurance and allegedly not fully accounted for Irish bank losses. Its the non executive directors' job to make sure of that.

    Now, what I would like to know is who is in charge of Robert Peston. Journalists also have certain responsibilities, too. They have to comment on an important decision by the EU competition authorities to investigate the allegedly rigged market in Credit Default Swaps, which drives countries on the EU periphery into defaults, don't you think?

    The CDS story would be worth more than speculation on whether state pensions use the right discount rate, which capitalist becomes a billionaire in the next flotation by cornering markets, or about results of a bank.

    Speculate about whether the banks are guilty of rigging the market in credit default swaps, Robert. Where is your insider information on that? And do speculators drive countries into ruin through these instruments? And whether you think they should be banned, as anybody who has any sense, thinks they should. If we do not want another financial crisis such as in 2008.

    That is what we want to know! Even though nobody want to tell us about it! Why not? Where is the thorough BBC journalism on CDS, how they make speculators richer as they make countries poorer and drive them into default!

  • Comment number 15.

    Still...they should make a bob or two from selling off 600 branches...

    Lloyds told to sell more branches by banking commission
    http://www.guardian.co.uk/business/2011/apr/11/lloyds-sell-more-branches-banking-commission

  • Comment number 16.

    Wow! What a game being played in this whole finanancial system!! Just waiting for the little boy to appear and say "the Emporer has no clothes" That'l learn em ;-}

  • Comment number 17.

    I can't believe that we have sleep walked into this mess. I can't believe that governments have let this happen. Worship of money and greed. Oh yes, those that have the money have power. That would explain it.

    CDS and sovereign defaults. It's so scarey and yet, as stated above, no real coverage.

  • Comment number 18.

    Start here, for here is the very essence of banking, however much they try to dress it up with no clothes but with cartoon trains in happy land....

    http://www.youtube.com/watch?v=WgGkgK-3Y3Q

  • Comment number 19.

    Today I believe Lloyds will post big losses and the Halifax will get the blame.

  • Comment number 20.

    Lloyds LOAN ARRANGERS granted too much L to V [ Loan to Value] like the rest , so they should change their name to L AAA Vvoyds AND THEIR MOTOWE to BETTER RED THAN DEAD"

    Until their QE rabbits { flying by the seat of their pans} learn to multiply real wealth rather than pocket inflationairy gains. from a quick buck.

  • Comment number 21.

    Vvoyds should make the most of their QErabbits and invite their dead Irish counterparrots for some flatline dancing with Michael Flatley

    Preferably a contemporary correogIraphed versioN of "Old McDonnald had a bank eei eei owe"

    And in that banK he had some ducks eei eei owe

    CLICK CLICK CLICKETY CLICK CLOP CLOP CLOP CLOP CLPOP

    aN D THE DUCKS WENT QUACK ,HEAR A QUACK THERE AA QUACK EVERYWHERE AAA QUACK QUAACK QUAAACK

    CLOP CLOP CLOPPETY CLOP CLICK CLICK CLICK EEI EEI OWE!



    Indeed they will dunce annd theyll dunce on the night they are wed

    THAY WILL DUNCE AND THEYLL DANCE

    cAUSE THE ROOM HAS NOBED

  • Comment number 22.

    Out of interest (no pun intended), are the banksters bonuses taxable presumably at top rate? If that is the case, and assuming they don't find an avoision technique, are the huge bankers bonuses not a good thing in that about half of it is a direct cash injection into the state coffers while the other half is spent on manufactured goods in our shops?

  • Comment number 23.

    19. At 00:13am 5th May 2011, Simon wrote:
    Today I believe Lloyds will post big losses and the Halifax will get the blame.

    Of course, or the Irish, rather than the true criminal in this matter: Gordon Brown and his Labour Party, ie: the same people who drove the UK banking system into the iceberg that's now sinking it. It might be happening all over the world, but it's those countries who were mismanaged the most that are suffering, like ourselves. I'm sure his plan would be to join Europe, which would have offered the same protection as Ireland Greece and Portugal, er, perhaps now's the time to distance ourselves from these leftist financially incompetant governments.

  • Comment number 24.

    Endowment policies,
    Personal equity plans
    Equity release schemes
    Private pensions
    Precipice bonds
    Self certification and 100% + mortgages
    Unfair bank charges
    Unfair mortgage penalty charges

    And now Payment protection insurance

    Perhaps we should play guess the next financial scandal.

  • Comment number 25.

    Quantitative easing?

  • Comment number 26.

    Once again, it looks as if our esteemed BBC Business correspondent is itching to tell us what we already know, but doesn't quite have the courage to follow through.

    You only have to look at the comments on this blog and Ms Flanders' to see that respect for both is on the wane.

  • Comment number 27.

    #7 "I don't know why we're still surprised at the downright venality, incompetence and greed of bankers, supported, for heaven's sake, by our elected representatives."

    The MPC are not elected. Without the support of the MPC, there would be no bonuses

 

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