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Lloyds: Is it doing enough for Britain?

Robert Peston | 11:10 UK time, Friday, 26 February 2010

In a 25-year career of taking an unhealthily close interest in banks, I have very rarely encountered results as appallingly bad as those published by Lloyds this morning.

Lloyds bank cashpointThe bank says the loss was £6.3bn - which it sees as marginally better than the notional loss of £6.7bn that it would have reported in 2008 had it owned HBOS for the whole of that year (it in fact acquired battered HBOS at the turn of 2009).

Arguably, however, the loss for 2009 was almost double the number highlighted by Lloyds at £12.4bn: there is a case for ignoring a £6.1bn credit taken by Lloyds from a revaluation of some of HBOS's assets and liabilities.

But the big horror, of course, was the charge for loans and investments that have gone bad: an awe-inspiring £24bn, up from a merely horrific £15bn in 2008.

Lloyds' implied excuse is that the bulk of these losses stemmed from the insanely-poor loans to companies - especially property companies - that were made by HBOS.

But - to coin a phrase - you are what you eat. And Lloyds did not have to swallow HBOS: the bank, led by the chief executive Eric Daniels, chose to buy it.

Daniels remains chief executive.

And there will be some who may regard the other board members as having taken leave of their collective senses in deciding - in the words of Lloyds chairman, Win Bischoff - that he merited "the full payout under the company's annual bonus scheme because of his significant contribution".

Those critics would perhaps have been placated when Daniels chose to waive his £2.3m bonus entitlement.

But it is difficult to escape the feeling that there is something of a gap between how the world sees Lloyds and how Lloyds sees itself.

Take the issue of support for the British economy - and remember that this is a bank into which we as taxpayers have injected £23bn for a 41% stake, and taxpayers have also provided £157bn of emergency credit through the special liquidity scheme and the credit guarantee scheme.

Bischoff talked of "playing our part in the UK's economic recovery... by extending a significant amount of new lending to businesses and households".

And - by the way - Lloyds has a contractual arrangement with the Treasury to increase lending to UK businesses by £11bn and to home-owners by £3bn both in 2009 and 2010.

Is that in fact what happened? Has it met those lending commitments?

Well, Lloyds' published numbers do not tell that story.

In every segment of Lloyds operations, loans and advances to customers fell: by £6bn in its retail bank, by £43bn in its wholesale bank (which deals with businesses) and by £1bn in its wealth and international division.

Breaking that down further, mortgages on its balance sheet decreased by more than £10bn, credit for transport, distribution and hotels was almost £4bn down and loans to manufacturers dropped by £4bn.

Now, there are perfectly good arguments why Lloyds needs to shrink its balance sheet to strengthen itself.

But that is not necessarily consistent with what's best for stretched British industry or households.

That said, its plainly in the interests of shareholders (who include taxpayers, lest you need reminding) that Lloyds has today increased its forecast of the annual cost savings it can make from integrating HBOS's operations with its own.

These planned cost savings have been increased from £1.5bn to a staggering £2bn.

However, you won't think that's great news if you are a Lloyds employee seen as a duplicated overhead and being made redundant at a time when employment conditions in the UK are dire.

Even so, it must be in the interest of the UK that Lloyds is rehabilitated. With 30 million customers, a weak Lloyds would not be good for shareholders or the economy.

But rebuilding Lloyds is very much work-in-progress.

In that context, it is significant that Lloyds - which was desperate to avoid an additional injection of support from taxpayers - has the lowest ratio of core tier-one capital to assets (by about two percentage points) of all the big British banks.

Some analysts would argue it needs to raise quite a lot more capital - or shrink its balance a good deal more, which would further constrain its ability to lend.

Also its share price of 53p fell today and remains well below taxpayers' buying-in price of 74p.

Lloyds directors - and Eric Daniels in particular - have some way to go before they can claim to be delivering for their owners or for the country.

PS: Jeremy Hillman, editor of the BBC News business and economics unit, has written a post at The Editors about why we have interviewed RBS but not Lloyds.


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  • Comment number 1.

    Instead of integrating HBOS and help create another giant too big to fail, disaggregate and combine with NR to build a strong strategic public sector bank that will respond to public policy in respect of both domestic and SME financial needs as well as the big corporates. You cant say it but it screams out of your blog - sack the Lloyds board. Another fine mess Mr Brown - Darling.

  • Comment number 2.

    This seems a little sensationalist. Surely last years results from Lloyds and RBS were worse? And the final positions from Lloyds seems to be no worse than the interim figures.

    Also, when you talk about lending targets set by the Treasury, you just go on to say lending has fallen - rather than say whether these were met or missed? From what I've read, retail mortgage lending was £35bn. Whose lending hasn't fallen?

    As for the shareprice at 74p, the most recent capital raising price was 37p (to avoid GAPS), which brings the average down considerably and still remains a good discount today.

  • Comment number 3.

    You seem to have answered your own question in this article Robert and the answer is plainly no. I also note your implied view on the position of Eric Daniels which seems to be similar to the one I have seen on notayesmanseconomics web blog. His examples of moral hazards and weakness of our political leaders is also strengthened by the fact that Lloyds lending rather than increasing as promised (and trumpeted by our government) has in fact fallen.

    Thank you for an informative update.

  • Comment number 4.

    Lloyds has always been a well run bank.
    Why Lloyds "bought" the train-wreck known as HBOS defeated me then, and still does. "Outside pressure" doubt.
    The "insanely-poor loans to companies--especially property companies" sums HBOS up.
    HBOS, RBS, Northern rock and Bradford and Bingley were all in the same insane-asylum.
    Guru V. Cable and veteran broadcaster Jeff Randall were telling them clearly for years that they were heading for disaster....did they listen?
    "Doomsday" property markets must not be allowed to take hold again, we must learn our lesson, and take the medicine.
    That we will all become poorer is not in doubt...our vast national debt will see to that.
    The people of the third world look to the West with envy at our wealth and lifestyles, wonder why they are treated like slaves and seem to end up paying for our mistakes.... but we in the West look to our financial industry and have exactly the same thoughts.

  • Comment number 5.

    And Daniels is still chief exec. This is the only bank bailed out by government in the UK or US that has not changed the Chief Exec and the results don't really show many positives

  • Comment number 6.

    As you say Lloyds could have refused to buy HBOS, but could they? Didn't they get pushed into taking over HBOS by no 10? How much leaway did they have?

    Oh I know that as a legitimate business Lloyds board were entirely responsible for the take-over, but how much shoe-horning was done? From the smatter of contemporaneous information there was government leaning on the Lloyds board.

    It is also clear now that Lloyds board did not do a good job at the due diligence and it may be that HBOS did not issue a correct letter of full disclosure either. For these the board should pay, and the shareholders pick up the tab. But, how much was our government involved in these normal processes not being done properly? FoI request, anyone?

    As to the current situation, it is very, very difficult. Somehow the fact that the board of Lloyds which took over HBOS has not resigned for failures, when perhaps it should have, and an interim statement giving the state of affairs of HBOS understood at the time of the takeover as well as the reality after full scrutiny, might help.

    Another thing that Lloyds should do in order to be attractive to depositors, is to insure the total of deposits it holds. Then it would be ahead of the game and money will flood in from all around the world, and give Lloyds some of the recapitalisation it needs. Eric Daniels refused bonus could help toward the premium for this safety measure.

  • Comment number 7.

    I do not know if the numbers that are quoted actually mean anything at all. I look around and still see that everything appears the same. The shops appear busy and I am told by a reliable source that if I wanted to purchase a house and borrow money it would be no problem. The world appears normal. I see busy roads and new cars, not the old bangers of my youth. I see well-dressed people who do not look hungry. Football attendances have not yet fallen, although sadly clubs have, but they did anyway. Some shops are closed on the high street, but many needed to anyway. I can buy what I want on t'internet.
    But I guess I live in a dream world.
    Can someone help me. Does the governments amazing debt include the money loaned to the banks to keep them afloat, if so how much is the figure because I need to separate it.
    Can anyone also tell me whether or not Mr Terry had his affair before or after Mr Bridge separated from his partner and whether anyone in the banking world worries about such really important issues as this. Sorry but I thought I was on Five Live's website. You see they will have to shake hands on saturday. Is this the hand whot.....

  • Comment number 8.

    I'd like to know how the penalties work out as Lloyds failed to lend as much as contractorily required. Also bit more about how bonus are split between cash and shares (which supposedly are linked to long-term performance and whether profits from these shares can be realised or whether there is a prohibition on the sale of them for say 5 or 10 years, bearing in mind the link they are 'supposed' to have to long-term profits, not short-term).

    The issue as to whether Lloyds, and more so RBS would have been better treated like Northern Rock is still open as far as I'm concerned. Could we have afforded to have 100% ownership and drive them as tax payers wanted? What motive does Lloyds have for paying back the Govt?

  • Comment number 9.

    The decline in lending to manufacturers and other business is very significant.

    Who wants to add new borrowing to their balance sheets in the current climate? Nobody.

    Who wants to pay down current debt? Everybody.

    You can hear the consequent implosion of demand from here. I was reading an industry report a couple of days ago about how one business collapse brought down another six immediately and damaged a host more. We can't go on like this but we will have to as nothing constructive is being done to prevent it.

    It is all very well our Great Leader shouting that his government is doing something, but anyone with half a brain can see that all he is doing is bashing the country's credit card again and again: aggregating the already high debt at a rate of knots. Nobody else seems to think this is a practical solution.

    Yes, the economy will have a very hard landing, so say your prayers.

  • Comment number 10.

    Whilst the losses are eye watering a lot of this is simply accounting not reality.

    My understanding (and no doubt an accountant will correct me) is as follows:

    Under the old accounting rules banks would make provisions for bad loans only when it was reasonably likely that the loans were not going to perform.

    Under mark to market accounting the loans have to be put in the accounts at market values, irrespective of whether they are likely to default.

    What that means for Lloyds is that ss the commercial property market has collapsed I suspect the entire commercial property loan book will have been revalued downwards including loans which are performing entirely satisfactorily.

    If I am right (and I am not an accountant) then the flip side is that when the commercial property market picks up and the accountants determine that mark to market accounting rules require a revaluation, Lloyds will suddenly make a large profit - which still has nothing to do with reality.

  • Comment number 11.

    I'm no chief executive, but I don't think anyone could have run this bank worse than this lot have. And yet some people out there STILL think this lot deserve have a bonus!

    That it's even legal for bonuses to paid in such circumstances, however "contractual," is a disgrace!

    In the Beeb's own summary one notable comment under the Mortgage Losses heading is, "It also revealed the massive scale of further potential losses lurking on its books because borrowers are struggling to repay their loans."
    There's more to come!!?...Oh yes!

    As you say Robert, " is difficult to escape the feeling that there is something of a gap between how the world sees Lloyds and how Lloyds sees itself."
    Sure is! If you were the boss and knew there were going to be more serious losses in future, why on earth would someone in the position of Eric Daniels think it credible to comment, "Looking forward, chief executive Eric Daniels said: "We are building strong earnings momentum and expect our performance to improve significantly in 2010 and beyond." If you're a Lloyds shareholder surely you have got to be asking yourself, is the bloke in charge completely bonkers?

    People at the top would do well to catch up fast, with the current, broadening, social sentiment....brought about by the recession, expenses and bonus scandals, that folk do not need, or want, to hear any more of the ridiculous delusional rubbish that bankers, MP's, Regulators and bosses in general, are spouting!

  • Comment number 12.

    My predictions for Lloyds and RBS - the government of whatever hue will eventually package up the bad loans into a new bank with the rump of NR, float the good stuff and make a big feel good thing about it and gradually write off the toxic stuff.

  • Comment number 13.

    I can't help feeling ever since this financial fiasco started to unravel in 2007, that we would all be much better off if all the banks had been allowed to pay the price and go under for their irresponsible behaviour. The only people who should have been protected were those saving with the banks. All bond holders and investors should have lost their shirts, along with top management, traders and other employees. I do feel sorry for the non-trader employees, but then why should they be any different to the hundreds of thousands of unemployed from other companies which have gone bust.
    A Schumpeterian process of creative destruction might have caused the stock markets to hit 90% below their peak. However, as in the early 1920s crash - there would have been a recovery. The likes of Virgin, Tesco, etc. would have picked up the pieces and established a modern retail banking operation for this country, without all the old boy network and a pay scale more in keeping with reality. What we now have is simply a Japanese replay of government subsidies proloning the agony, whilst the rich get richer and incompetent directors are rewarded as if nothing went wrong.
    The armagedon scenarios and replays of the 1930s are a suitable poster child for the financial community to scare governments and themselves into believing that the world would end if the banks went bust. In reality, the world would not end and indeed a more efficient system might arise out of the ashes. However, it is in their interests to keep this myth alive.

  • Comment number 14.

    I have filled in a site-questionaire from the BBC asking me to rate various aspects of the site.
    I found it's just a web site.
    But it happens to be the site of Robert Peston...the business and financial correspondent of the biggest broadcaster in the UK, and Robert Peston has seen us through the biggest bank-bust in history.
    That makes this site very important.
    We are not under a military dictatorship....we change still whinge.
    We don't have to "write to the Times" or stand in a corner of Hyde Park and shout....the internet has changed all that.
    Whether anyone reads the comments or not is probably not important, but the site is.
    R.Peston is not one for "outbursts of rage or hate" need to look at some of the newspapers for that, but with R.P. you have to look between the lines, the clues are there.
    Mr Peston comes in for some hard criticism on here sometimes....but he didn't get us into this mess....the "gnomes of Fenchurch St" did that, or should that be the "gnomes of Princes St"?
    In general I find this site good, but I found the questionaire a little confusing. (not been at the drink).

  • Comment number 15.

    Good God, 30 million customers? That's just mind boggling. They can basically tell President Mandelson to take a long run off a short pier. They're too big to fail, to big to regulate, and too big to be controlled.

    They must - MUST - be broken up before they take us all down with them.

  • Comment number 16.

    It is sad when a bank with a good history and reputation can be brought down by the hubris of just a few top people, who clearly are not 'the smartest people in the room'.

  • Comment number 17.

    The banks are stil sitting on a time bomb. Investing in them is a pure gamble yet us taxpayers have gone in very heavily.
    A lost generation where tax is high and spending by governments is low. This is the good news! Alternatives include a Labour government that continues to spend heavily and a lost country rather than generation.
    RBS justified paying bonuses yesterday and so are Lloyds today. Why are taxpayers not up in arms. I see a strike has been called for early March by 270,000 public workers in this country. No election yet then.

  • Comment number 18.

    Mr Heston, as a Managerial Employee of a Bank who did not obtain Government financial backing and who are yet to announce their results, I am keen to hear you thoughts and feelings towards the sector and all those involved being tarred with the same brush.

    Losses here and there with support from a Nations money, yet bonuses paid.

    We will report a profit in the £Bns and will likely be persecuted in the press and from the public for bonuses and pay increases when we do not resemble the other 'financial institutions' that surround us.

  • Comment number 19.

    As an employee at Lloyds TSB Head Office, I can only agree with the statement that Eric Daniels appears to have a different view of the bank from anyone outside it. But then he'd have to.

    Daniels clearly made a major error in agreeing to acquire HBOS, and he should have been forced out because of it. Instead however, he's rewarded with the offer of a hefty bonus - no wonder he turned it down. The biggest issue here perhaps is why on earth he qualified for it. The share price is appalling, the company is deeply in debt and the reputation of perhaps Britain's most highly regarded bank, built up over decades, has been trashed and will take years to recover.

    Frankly, the man should step down and this is a view I know is shared by many Lloyds employees, though clearly not those at board level. In a few years I'm sure he'll have done his stint and will leave with a golden handshake of obscene proprotions. That won't change the simple truth that his greed and ambition have laid low a great institution.

  • Comment number 20.

    I would like to know this;

    Just how much loss would Lloyds have to make before the execs deemed that they were not entitled to a bonus, £10bn, £20bn, £30bn?

  • Comment number 21.

    Both RBS and LLoyds are complaining that they are unable to achieve the governments lending targets. They have both suggested that this is because the demand is not there. Might the lack of demand have something to do with the fact that despite the base rate falling to historically low levels, the average loan rates have not moved. This makes the loans on offer poor value and therefore unattractive to potential borrowers.

  • Comment number 22.

    Very sad article.

    If Lloyds had not stepped in (and don't think for one minute they were not coerced into it by No. 10) then what would the bill be for the taxpayer now?

    People seem to forget Lloyds is effectively in a government fitted straight-jacket - they have to keep more capital than before the credit crunch whilst being told to lend more and having the appalling basket-case of HBOS loans to deal with which impacts both of the above severely.

    Those calling for heads ought to think before they speak - you could have had a government appointed head of HBOS and another 20BN on the govenment debt to deal with.

    Anyone think that's a better scenario than where we are now?

  • Comment number 23.

    #15 Rogerborg

    Whilst I'm a supporter of having Lloyds merge with HBOS because it has meant HBOS is not 100% public owned I agree it really is far too big.

    Parts of LBG will be split during the next few years due to the EU competition regulations (which were waived at the time of the merger).

    However it will still leave an enormous retail bank which arguably should be nationalised and run at break-even.

    My view is it will never happen though - the Labour/Conservative parties (same thing really!) will never do it.

  • Comment number 24.

    As a shareholder who voted against this merger I just do not understand why Eric Daniels has not been sacked. Is the reward for this disaster that he stays in his lucrative position where he was deemed worthy of a bonus even if he chose not to take it? Mr Daniels - what have you to say to all your staff and small shareholders who have lost life savings over your appalling decision to take the merger with HBOS forward. LTSB was s safe bank giving dividends to folk who needed it. You have crippled your staff sharesave scheme leaving your staff's holdings worth peanuts. Why are you still in office?

  • Comment number 25.

    #18 Glanbandit

    Ditto - I work for a similar bank (possibly the same one!) and we will suffer the same fate. However I won't even get a pay rise let alone a bonus this year

    The hysterical reactions of the BBC and others are laughable really - just look at the BBC reaction when people ask for more disclosure of their accounts (and we own them).

    Lloyds wre foolish to buy HBOS and have and will suffer greatly for this. The public do love a spectacle and I'm sure this will rumble on and on.

  • Comment number 26.

    "Even so, it must be in the interest of the UK that Lloyds is rehabilitated. With 30 million customers, a weak Lloyds would not be good for shareholders or the economy."

    Surely it's not Lloyds, as such, that needs to be rehabilitated. UK society needs a healthy and competent structure to provide the services currently being provided by Lloyds and others. But this structure doesn't have to include the entirety of the corporate entities that are Lloyds, or RBS. Could it be the case, as some argue, that Lloyds' and RBS' past imprudences, whether or not these were the result of politically imposed imperatives, have left them in a position where they are too hamstrung with liabilities to be able to provide the UK with an adequate retail banking service? If so, wouldn't we do better to retain the crippling liabilities as public debt, and float the healthy parts of the banks out to carry out their business unimpaired?

    With adequate safeguards to prevent the same thing happening all over again, of course.

  • Comment number 27.

    "We will report a profit in the £Bns and will likely be persecuted in the press and from the public for bonuses and pay increases when we do not resemble the other 'financial institutions' that surround us."

    so you are competing for years with institutions which are now known to be 'fraudulent' (I know all is legal... but this is just until the law catches up).... The simple fact you are still there only proves you are no different (a bit like when 'performance enhancers' are not regulated straight away -> they become the norm...)

    the problem of people is not with the bonuses per say - it is with the fact you have gambled to crisis point... and no sign of even acknowledging it...

  • Comment number 28.

    Looking in more detail at the ONS press release regarding GDP, it actually implies that Q4 2009 GDP in volume terms has not been revised upwards at all, hence also implying that the better growth on Q3 is indeed merely down to a downwards revision of Q3 2009.

    The ONS press release states that GDP in Q4 2009 was 3.3% lower than in Q4 2008. Given the chained index volume number was 104.1 for Q4 2008, that implies a reading of 100.66 for Q4 2009 and the initial estimate for Q4 2009 was ....

    .... 100.7!!

    Wooh, the stronger Q4 2009 recovery is due to a weaker Q3 2009 than previously reported! Spin indeed!

  • Comment number 29.

    I saw Eric Daniels today and he looked as if he'd just swallowed something very nasty and it had stuck in his throat. Probably why he couldn't speak to the BBC reporter.

    They have to be worried and probably so should we be that a large fall in house prices without an investment banking side to balance the losses could show these losses to be only a trial run of what's to come.

    How relieved Barclays must be that they chose to go their own way.

  • Comment number 30.

    Now, how much of their loss is due to buying Mortgages from Investment Bankers ?

  • Comment number 31.

    My suggestion to UKgov:

    Take the banks and the finance industry for every penny you can, the majority of the electorate will be with you. History shows that past governments have destroyed our other businesses and got away with it. Just leave somewhere for ordinary people to keep their savings.

    Make public service as efficient as you can without reducing what it delivers. It's possible if you have the will. Get out of foreign wars, military adventures and anything overseas that brings no financial return.

    Invest in manufacturing, in new industries, green energy. Spend on our universities and schools. Invest in our exporters.

    The alternative is sit still and wait to die.

  • Comment number 32.

    Banking will never be safe until they drop the American banking practices.

    IE no more Salesman pushing Loans.
    No more securitisation of unknown quality debt.

    And no more artificial trading environments, designed purely to generate commissiios out of other peoples money (diminishing their money with each transaction).

    Does pointing this out make me mean ?

    Oh no wait I lost nearly all my savings that were in Bank Shares.
    Would you buy second hand Shares of these people ?

    Your Pension Fund might !

    Enough to give you nightmares.

  • Comment number 33.

    Another banking story.

    How novel.


  • Comment number 34.


    You seemed to have misunderstood a key point when analysing the volume of lending.
    "In every segment of Lloyds operations, loans and advances to customers fell: by £6bn in its retail bank, by £43bn in its wholesale bank (which deals with businesses) and by £1bn in its wealth and international division."

    The "loans and advances" balance sheet item is shown net of the very same large impairment charges you are lambasting.

    So, to simply state retail loans and advances fell by £6bn misses the point entirely. You have to look at gross new lending, and disregard repayments by customers and impairment which go through this line item to get the movement you wish to comment upon.

    The other contradiction in all of this is that LBG are in a very difficult position.
    They are asked to increase lending to businesses and retail customers, yet are criticised for previously poor lending decisions whereby they lent too much to risky investors and customers with poor credit ratings.

    There is a balance to be had, otherwise your post 1 year from now will be along the lines of "Hasn't Eric Daniels learned his lesson?" and criticising them for further poor lending decisions and no doubt further large losses.

  • Comment number 35.

    It never fails to make me laugh when people bemoan the "pressure" under which Lloyds bought HBOS. They've been under much greater pressure to eliminate unfair charges. They're under greater pressure now increase lending, and rein in the bonus culture. They are doing none of those things.

    Lloyds bought HBOS out of greed and hubris, not under pressure from the Government. Anyone saying differently is a disgruntled shareholder. Period.

  • Comment number 36.

    Another day, another banking scandal.

    If any company I worked for made a LOSS of £12bn, it would be lucky to survive the administrator. Especially after an injection of £23bn of taxpayers money and a further £150bn of emergency credit! At the very least, the MD would be sacked and the remaining employees would get a huge pay cut.

    But apparently all is well at LLoyds in 2010. The UK will win all the remaining gold medals at Vanvouver and England will win the World Cup. We will have the warmest summer since records began and there will be 1000 new millionaires created from the National Lottery. And pig farmers will have to build high fences to prevent all their stock flying out of the pen. All will be well in the Great Britain of 2010.

    So there.

  • Comment number 37.

    It is fair enough to provide extra money for the banks to lend out, but I've always been uncomfortable with the idea that they should be forced to lend it with legally binding guarantees. After all if you are forcing the banks to lend are you not at the same time forcing people to borrow? If the demand is there naturally then the funds should be there to support it, if not then its maddness to push cheap money onto people today when interest rates will go up tomorrow. Its not very far sighted is it?

  • Comment number 38.

    Happy Silver Annivesary, Mr Peston.

    May the next 25 years of BIFFING the banks make you even wiser than you are already.

    Will we be MULLERED tonight ?

    PS Judging by your blog photo were you reading Financials' End of Term Reports in your cot ?

  • Comment number 39.

    It makes me more than angry when these directors and executives try to justify their pay, bonus and performance.

    I am a Lloyds customer for both personal and business accounts. I started my company 18 months ago and remember being in the first meeting with my business manager where he plain as day said that I shouldnt bother applying for any form of credit or overdraft as it would be declined on the spot.

    I have managed to get the company into a very good position without any help from the banks, who are more than happy to charge me for the privilage of banking with them.

    We will this year post a profit just under £100k, but when I recently went to Lloyds and asked for a loan to expand the company and move to larger premises they turn me down again. Even though this would have meant larger revenues and more money in the bank account for them to "speculate with".

    Not only have they not helped me but this has had a direct impact on me recruiting new staff members and boosting the productivity of the UK workforce.

    Lloyds are doing nothing to help the UK and its customers out, I find it incredulous that the politicians allow this to continue. Its insulting to our intelligence.

  • Comment number 40.

    #30 Supercalmdown

    All the more reason for splitting up the Retail and Investment Banks and making it impossible for Retail banks to take on unknown liabilities like they have in the past.

    Still in the dark why whoever sold these products has not been prosecuted and their assets seized.

  • Comment number 41.

    #33 Guy Croft

    Another identical post by you.

    How novel.

    Proves how sad we all are still reading and rplying to thie stuff!)

  • Comment number 42.

    #36. At 1:49pm on 26 Feb 2010, James wrote:

    "But apparently all is well at LLoyds in 2010. The UK will win all the remaining gold medals at Vanvouver and England will win the World Cup."

    Now come on let stop being unrealsitc here - quarter-finals at the World Cup maybe. Others totally agree!!!!!

  • Comment number 43.

    The banking model only works in an expanding market.

  • Comment number 44.

    Lloyds: Is it doing enough for Britain?

    No...and why should it?

    It's only reason for existence is to provide exploitative opportunities for its board of senior management. There is no other reason for its existence - it is not there for the benefit of the UK, taxpayers, depositors, clients, customers or even shareholders and indeed stakeholders of any description..

    There isn't a shred of paperwork or anything else anywhere which can contradict this statement on planent earth because the banks has a priority of internal payment which is entirely within the control of its Board.

    That is the way it has been set up and lawfully operated within the country within which it is registered as a company.

    Unless there is something within UK Company Law to show anything different then there is no answer to be given to the original question.

    Lloyds bank exists and is operated so that its is doing enough for its Management Board - anything beyond this is a .... 'bonus'.

  • Comment number 45.

    As a Lloyds shareholder who had rightly avoided buyins HBOS shares I feel particularly aggrieved.
    How well would Lloyds have faired had it avoided this toxic mess of a bank that is HBOS?
    The great majority of institutional shareholders who made voted in favour of this deal did so with regard to the fact that they also had substantial shareholdings in HBOS, and that the combined company would be better for the institutions than having to write down to zero all their shareholdings in HBOS.
    Democracy at work perhaps, but I lloyds-only shareholders like me the harsh end of that deal.
    Political pressure was certainly applied to the board, our Gordon could never allow a scottish bank to go under, especially as this would have shone such a harsh spotlight on his own woeful decisions on the financial regulations and regulatory bodies of the market

  • Comment number 46.

    How could one deny bonuses with such stellar performance. But, the bonuses are with taxpayer money and not that of the bank investors. What is amazing is that the banks convienced the governments to participate in this scheme after their earler scheme had feel apart and took the world economy into a stall. You have to wonder how the governments could be so stupid or so corrupt. There are no other reasons that can be defended. The rationale for the bail-out has not proven correct and the excuse that "just think if they would have failed", may consider a response of, "things may have become better sooner." The banks and governments only provide one possibility to the question but there are certainly others that should have been considered. If you offer anyone large sums of money with little or no requirements for change, who wouldn't accept it. I guess one could justify this as an effort to maintain the luxury car industry.

  • Comment number 47.

    I think that Robert got his headings wrong over RBS and Lloyds. Shouldn't it have been Poor Lloyds, poor Britain?

  • Comment number 48.

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

  • Comment number 49.

    Just had a closer look at the LBG results and the 24BN in bad debts.

    Here's verbatum from the results:

    "At the half year, we said that our impairments had peaked at the Group level. The second half bears out this guidance and impairments declined 21% during this period."

    Putting my O level maths head on (yes rather old head) that means provisions were 13.4BN up to June and 10.6BN from July to December.

    LBG are predicting similar reductions in 2010.

    I hope I'm wrong but if they mean there will be more provisions but 21% lower every six months then they will be writing off ANOTHER 15BN in 2010 on top of the 24BN for 2009. And another 9BN in 2011 (if provisions

    I hope I'm mis-interpreting this but that would mean provisions of 45BN by end of 2011.

    I'd really like to know if these are 'real' bad debts i.e. never getting them back or provisions that might come back.

    If the former then it's game over for getting the public share back.

  • Comment number 50.

    Lloyds' results are bad. Lloyds provide a substantial proportion of retail banking and thus the country is in a very bad way! The fact that Barclays and HSBC (and indeed RBS) are not as bad is probably only due the the success of the gambling arm, not their retail banking. (The gambling arms being the recipient of the 200bn QE bail outs from the Bank of England.)

    What does this tell us: we are in deep do do, and we will be in it for a decade (and we will not come out of it until and unless the BoE raises interest rates so that money has a sensible price again)!

  • Comment number 51.

    I remember being under the impression that Lloyds was being strongly encouraged by the government to take on HBOS and that the government were promising to turn a blind eye to the monopoly rules to get the deal through. I suppose that Lloyds could have turned them down, but they were licking their lips with the promise of riches instead.

    What exactly would a CEO of a bank have to do to not qualify for the maximum bonus?

  • Comment number 52.

    Ian wrote:
    Just had a closer look at the LBG results and the 24BN in bad debts.

    Here's verbatum from the results:

    "At the half year, we said that our impairments had peaked at the Group level.The second half bears out this guidance and impairments declined 21% during this period."

    Most of the impairments are wrapped up in commercial property and bad investments in Ireland and Australia. The one thing we can't guarantee is whether we remain out recession or dip back in but Ireland are certainly in a deeper recession, locked into the euro with high unemployment and a deflated property market.

    It is diffiucult to make predictions about getting the public share back but it is not neccesarily something in LBG's control. 2011 looks better
    My question would be whether the taxer payer will get any return from their money?

  • Comment number 53.

    It seems to me that the banks are totally uncontrollable there appears to be no goverment,regulatory authority,organisation,shareholder,or taxpayer who can change the way they operate they are all inefficacious it does not only apply to banks but to energy companies and water companies it's not that the taxpayer is stupid they just elect stupid people

  • Comment number 54.


    Please do a comparison of all the banks results once HSBC has reported on Monday, it seems only banks with diversified interests and sensible lending criteria like Barclays and probably HSBC seem capable of dealing with the ups and downs of the economy.

    Looks like Lloyds need an investment banking arm, to mitigate there ongoing losses in retail and commercial divisions! Saying that Barclays retail and commercial divisions still turned a profit in there own right, so guess it must be a management issue coupled with lax lending controls.

    Do you think RBS will recover faster than Lloyds as although they were no doubt the most reckless pre credit crunch, their more diversified business model should enable them to maximize profits over the next few years?

    If the too big to fail banks need splitting up why is it generally with the exception of RBS that it is the smaller banks (HBOS, Lloyds, Northern Rock, B&B) are the ones that have really suffered. After all the fore mentioned do not have investment banking arms and still got it wrong on a monumental scale and failed while the larger banks HSBC and Barclays continue to perform and have thus far ridden out the storm extremely well. Splitting these two banks up would surely be madness.

  • Comment number 55.

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

  • Comment number 56.

    I exited corporate banking in late 2006 and for a while before that it was clear to many of us that HBOS had a gung-ho attitude towards lending and was doing deals that other banks would not touch. Therefore, it comes as no surprise at all to me that there are further massive write downs. The Lloyds board appear to have been blind to all this and were driven by a dreams of glory in the UK domestic market, when GB bounced them into buying HBOS. Unless Eric Daniels was strongly against the HBOS takeover, the Board's judgement must again be called into question by agreeing a contract for their CEO that can warrant "the full payout under the company's annual bonus scheme because of his significant contribution". I have heard a whisper that Lloyds are now doing marginal lending to try and meet the Government's targets. Time to finally bail out of what was once a well managed and conservative bank?

  • Comment number 57.

    This blog is misleading and hugely sensationalist. Yes the results are bad but did you expect anything different? Read Stephanie's blogs instead for a blog based on facts rather than the Mr. Peston's daily tabloid.

  • Comment number 58.

    The dominant status of BANKING STORIES by the BUSINESS EDITOR is a DISGRACE.

    I have written to the BBC to complain. Thousands of businesses are in EXTREME difficulty thanks to the complete collapse of Gifted Gordon's STABLE MACROMECONOMICS and it doesn't get as much as a PASSING MENTION in the BUSINESS EDITOR'S BLOG.



    Happy Ian?

  • Comment number 59.

    Don't think Lloyds have failed to lend to any extent - it would be suicidal for some businesses to take out a loan with the rates they would be offered/collateral required.

    The reason Lloyds are performing badly is because of HBOS - there was some doubt about disclosing full accounts at the time.

    Have to agree with 44.nautionier - this is what this is all about - providing money for 'me mates'. This is all that Banks, businesses, the government of the day, everything is all about.

    It's only us down here that whinge about it.

  • Comment number 60.

    What comes out of all this banking chaos as a lesson well and truely learned? Well do not treat your borrowers like an orange squeezing it and squeezing it til there is nothing left!
    Consumers and businesses have been treated like an orange until they squeezed that much they pushed everybody over the edge in to foreclosure.
    The banks deserved all they get, only trouble is there screw up as caused pain and misery for millions and my guess more will lose there homes and businesses as a result of the desperate claw back to profitability.
    Tactic being used take the state handout reduce lending to a min and right off the bad loans, hey presto your figures look better courtesy of the tax payer no less!

  • Comment number 61.

    Dear Robert,

    Given that the Government seems to think the Government owned banks are lending enough (because demand for loans has fallen) even though they have not met their targets (they have not punished Lloyds and RBS for missing these targets) presumably they will not agree to any more QE (assuming supply of credit was the most important reason for QE amongst others).

  • Comment number 62.

    I'm an old very ordinary chap. The Executives of this Company
    (which has failed) should be loosing their jobs not getting any consideration about receiving a bonus surely

  • Comment number 63.

    Mr Peston and fellow bloggers

    Today's headlines [The TIMES]:

    BBC signals an end to era of expansion
    The corporation plans to close two radio stations, shut half its website and cut spending ..(End quote)

    And I understand a quarter of the 'web' staff are to go....

    Could not the BBC negotiate a loan from Barclays...or HSBC...if not Lloyds ?

  • Comment number 64.

    Without being remotely connected with high fiance or banking, it's obvious Lloyds took on HBoS KNOWING the latter was precarious - about as dodgy as itself - and the casino denouement was imminent. Only by merging together could the two of them become too-big-to-fail and escape NR's fate - something no-one in this Government or banking could cope with. This leave us the taxpayers - and our children in due course - to shoulder the consequences of all possible (whether Tory or Labour) policies in sustaining the too-big-to-fail contention; we enjoyed a few crumbs when there's a boom, but when the big bust inevitably came we are counted on to cough up. And we will; we must - unless we vote with our feet. Not many of us have the means/opportunity/motivation to do so, and governments know it.

  • Comment number 65.

    The whole question of how to encourage lending into the economy is a complex issue which Robert has done a reasonable job of highlighting; but needs some much deeper analysis to understand properly. If you're up to it, here's where to make a start:

  • Comment number 66.

    All in all I don’t think this is too bad considering the size of the bad debt provision which itself wasn’t too surprising.

    Most CEO’s would give their eye-teeth to be in Eric Daniels and Stephen Hester’s positions - having the UK Government (and Taxpayer) as a long term shareholder is a dream come true for any large corporation in the current economic climate.

    They both know that they won’t be under pressure to forsake long-term stability in order to chase short-term profits (one of the reasons for so much of the unsustainable growth of recent years) and each have an excuse to clear the balance sheet of anything even faintly dubious.

    In Stephen Hester’s case he is a new CEO who gets all the bad news out of the way ASAP because it’s the fault of the previous incumbent - any employee knows that the last person to leave always gets the blame.

    In Eric Daniel’s case, he’s the "victim" of a “forced” merger and all of the problems are blamed on the previous bunch - the heavy emphasis on the previous failings of HBOS is a classic case of “nuffing to do wiv me, Guv” blame shifting.

    So that’s what’s really reflected in the accounts and I’d be very surprised if Lloyds isn’t declaring an after tax profit before the end of the year – though I expect it to be Q4 not Q3 – because underneath the headline figure of -£6.3Bn there was actually a reasonable profit for Lloyds.

    RBS are in an even better position! If you reverse out the one-off adjustments and special items RBS actually made more money that Barclays on actual business activities

  • Comment number 67.

    Lloyds: Is it doing enough for Britain?

    No of course not but then Lloyds (and the entire financial services sector) is simply taking its lead from Alistair Darling. We all seem to have forgotten that in his first interview with the FT he said that he didn't believe in economic patriotism.

  • Comment number 68.

    A few pertinent points

    a) Daniels is the only Government owned Bank head NOT to be replaced, because his Bank didn't go Bust, HBOS went spectacularly bust and, reputedly, over cocktails Daniels agreed to help Brown out and took it on, unfortunately without due diligence, at least unfortunately for me and the other small Lloyds shareholders. You can see how spectacularly HBOS was bust when you see it also took Lloyds with it!

    b) This Bank now has 2/3rds of the UK market, and it still posts a massive loss AND the Commercial loan book is still causing concern, at least that is what a Bank employee tells me - lucky the staff don't have aa say in who runs them, Daniels would be toast I'm led to believe.

    As for increased lending, it has tried, it tried with me, it halved my overdraft without any negotiation then offered me an expensive loan to make up for it. I said no and have since cut back on everything, it cost me a lot of money, and it will take me until June, if I'm lucky to recover, but as soon as I have, then I'm off to join another bank, and Daniels and Lloyds can get EXPLETEIVE DELETED TO KEEP THE MODS HAPPY

  • Comment number 69.

    One day the story of Lloyds disastrous and totally crazy takeover of HBOS will be told. It will almost certainly start from an evening engagement when Sir Voctor Blank (Chairman of Lloyds TSB) met Gordon Brown, and from that "chance" meeting must have come away with the idea that Lloyds would get a free run at HBOS. A tasty morsel if ever there was one.

    Forget the competition authorities in the UK and the EU, who were about to agree to a takeover that bust every possible rule in the takeover code. Something like 30% plus of savings and mortgages in the UK. Forget the Treasury and the Chancellor, and the FSA. What was needed was for Sir Victor and his CEO, Eric Daniels, to get the Board on board, and the institutional shareholders, a lot of whom held shares in both banks. They would go along with the deal to save their HBOS bacon.

    There would need to be a bit of due diligence, but time was a bit short and this was a deal in the country's interest. To save the banking system, the country, and, probably, given the likely architect of the deal, the world. There would have to be an EGM, but that would be easy to handle. A phantom group from North of the Border made noises about a counter bid, but didn't have enough money. The ordinary sharholders were getting very apprehensive about the bid by now, and expressed their concerns at the EGM to approve the bid. What a load of ingrates was the message from the platform. You lot couldn't see a snip if it leapt up and bit you.

    The bid goes ahead, together with a rights issue at £1.73 per share. Since the shares had slumped only less than 1% take up the rights, leaving it all with Mr Brown. Serve him right, except he is just a front man. I should have said leaving it with us, the taxpayer.

    The true extent of the disaster unfolded in the form of horrendous losses of the kind never seen before in British banking. And the latest as reported by Robert above. So how much due diligence did they do? How much can you do on the back of a fag packet?
    The EU suddenly woke up long after the horse had bolted and started flexing its muscles over disposals. To be fair they gave Lloyds four years, which was probably a gesture out of the knowledge that they had screwed up in allowing the bid.

    The rest is history, in that two further rights issues have failed to provide the comfort needed to say that LLoyds is sound. The true extent of possible future losses is a total mystery. The last rights (or should it have been the last rites?) only barely yielded enough to cover the losses of £24bn. Thus shareholders have forked out three times and ended up with a dud worth 52p. And with a very dubious future. The same company that was worth £10 per share on 1 April 1999, and £3 per share at the time of the bid.

    In my view any bonus fund is due to the shareholders, who have given up their dividend to help save their company. Sir Victor has gone (thankfully) and in my view Mr Daniels should be working for nothing until he and his colleagues have restored Lloyds to something resembling soundness. If they have any doubts about how shareholdrs feel about their performance they should put it to a vote on the question "Do you think the Board of Lloyds TSB acted in the best interest of their shareholders". With no block votes, but one vote per person or institution on the register.

  • Comment number 70.

    Any business is faced with certain realities that both the governments and the banks have decided to ignore. If you invest on expansion (long term debt)you would like some indication that the government has some workable plan to support economic growth (it doesn't) and that the banks that lend you the money will not put your loan into one of the empty boxes they created that caused the collaspe in the first place (all such empty box instruments are still in use and unregulated).
    The governments, the banks and the economists, not restrained by reality, continue as if it is nothing more than a "Credit Crunch".

  • Comment number 71.

    69. At 7:48pm on 26 Feb 2010, majorroadaheadagain2 wrote:
    "Do you think the Board of Lloyds TSB acted in the best interest of their shareholders?". With no block votes, but one vote per person or institution on the register.

    Like that’s going to happen in a hurry. :-)

    As a taxpayer I think Eric Daniels and co did the right thing agreeing to take on HBOS (at half book value as I recall so apparently a bargain anyway).

    As a shareholder in Lloyds (but not HBOS) there’s no way it was in my best interest because I have lost a bucket-load of money over the last 12 months.

    Lloyds shareholders who were formerly HBOS shareholders would probably say the opposite as they would have lost all their money otherwise and would obviously say something is better than nothing.

    I think those last two paragraphs would indicate how the voting would turn out and large institutional investors abstaining for political reasons.

  • Comment number 72.


    My last para was really about LLoyds TSB shareholders telling their Board what they thought of the decision to take over HBOS. Particularly given the way in which Mr Daniels and others were telling anyone who would listen that they had actually done a very good job since the merger hence the bonus of £2m plus for Mr Daniels (that he "generously" declined). And the explanation from Mr Daniels that he had saved the company from the Asset Proetcion Scheme (with money from shareholders in three rights issues in a year).

    It was a comment based on my "if they have any doubts etc", but taking your two paragraphs together, and assuming as you say the institutions wouldn't vote for political reasons then it should be remembered that ex Lloyds TSB shareholders were given significantly more new shares than ex HBOS shareholders on the merger. So if there ever were such a vote Daniels and co would be left in no doubt their former shareholders thought that the deal was a stinker and that they were responsible for it. As I say, after all that has happened they still don't get it.

    Like Sir Victor Blank, Brown will be gone soon, and my message to him would be that the Government should never aid the use a publically quoted company in any way that is not the best interest of the shareholders of that company. For political ends. And to Sir Victor Blank and Mr Daniels my message would be to take a thousand lines - "I will always ensure that appropriate due diligence is carried out and not sign off until I am satisfied with that due diligence".

  • Comment number 73.

    Robert, having read your article I find it curious that you never mention that Lloyds actually announced a statutory profit of £1 billion today.

    Surely it is a bit odd to look at the losses but not take into account the offsetting goodwill credit relating to the acquisition of HBOS. It is clearly stated in their results announcement today.

    Why have you overlooked this, as it seems to me you are giving a very partial view.

  • Comment number 74.

    72. At 9:01pm on 26 Feb 2010, majorroadaheadagain2 wrote:

    Like Sir Victor Blank, Brown will be gone soon, and my message to him would be that the Government should never aid the use a publically quoted company in any way that is not the best interest of the shareholders of that company. For political ends.

    I am surprised the no legal action has taken place; I find it almost impossible to believe that what Brown, Blank, Daniels and Hornby concocted was legal. Still, I've learnt a very expensive lesson, the stock market is not for small investors.

  • Comment number 75.

    Dear Mr Peston,

    You obviously like writing about banks and should do so because they have caused us a lot of problems of late and they are a huge piece of our economy. In the short term we are sadly dependent on banking and finance. However, we still have a few businesses outside of this sector. I would suggest that if the UK has much to look forward to in the next ten years, it needs to grow something outside of banking and finance. Would you please try to look at those new areas and discuss some important issues relevant to them?

  • Comment number 76.


    74 "I am surprised that no legal action has taken place"

    Me too. The best action against one of the participants that I can think of involves an appropriate notation at the ballot box.

  • Comment number 77.

    Bankerbashing is a blunt and pretty useless tool but one we should continue to use. Hidden charges, fine print, juggling terms and conditions, stitching people up, entrapment, advertising of impossible to get deals, cartels and such tricks are becoming the norm.
    They are not wealth creating.
    Neither is the culture of paying spiralling salaries to get (the same) talent, nor arbitrary rules to justify bonuses that are only an excuse to hike rewards in the old boy network.
    A friend of mine spent two days a bit cold and hungry as her benefit payment was swallowed in bank charges (wish I'd known at the time). Imperfect she may be, but a charitable act by the taxpayer was reversed by the bank. Hazel Blears and Fred Goodwin experienced their pariah status. Most others are well insulated from public opinion. Let not our concerns for the well being of the wealthy distract us from recognising the deepening injustices they are perpetrating in society.
    I live in a deprived inner city area. There is much prejudice and unfair discrimination directed at people who live in such areas. Beyond the headline grabbing stories, people are genuine and honest, moral and hardworking. Many have little, never had much and never will have much, but contribute to the unimaginable wealth of more fortunate individuals - and in due course their children some of whom have little to look forward to other than a feckless existence of idle luxury.
    So lets try to avoid feeling sorry for the bankers, the fat cat council bosses, the insurance executives or anyone else that resorts to plainly exploitative methods of getting rich. If Eric Daniels is sitting at home, crying his eyes out, smoking like a train and shooting heroine up his veins, then yes let's lay off. But otherwise - get him on the box and grill him. He'll have plenty of time in heaven on earth to get over it later and ought to muster up a bit of courage for ten minutes.

  • Comment number 78.

    77. At 9:49pm on 26 Feb 2010, PacketRat

    Well said.

  • Comment number 79.

    I think you bring bad luck on yourself. Over the last few years the news gets bleaker and bleaker and even if a company did make money I am sure Robert would have a but near the end of the story. Not all business is doing badly.... not all businesses borrow money. I think positively and it has made me my fortune... why dont you negative guys just try a week of thinking positively about something. Be grateful that the country did not go completely down the pan, be grateful that none of our banks were allowed to fail. If you spent the first ten minutes of your day saying thank you thank you thank you and then went outside and gave some poor person 20 quid that you cant afford. I bet you will get 100 back. Find some success to write about please Robert.

  • Comment number 80.

    In light of the £6.3bn operating loss does anybody else see a degree of irony in LloydsTSB's current TV advert which starts with the words

    "Need to keep an eye on your finances?"

    Oh dear, oh dear, oh dear.

  • Comment number 81.

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

  • Comment number 82.

    As an ex-Lloyds and Lloyds TSB employee and current Lloyds Banking Group shareholder, I understand and share the frustration of many current employees (whether or not they have earned a bonus for their personal performance in 2009) and shareholders who have seen the share price and dividend on their shares (in the case of employees saved for through Save as You Earn and Share Incentive Plans over many years) fall through the floor. I find some of the ill-informed reaction to the results just announced less understandable.

    There is no doubt that the 'due diligence' which took place prior to the takeover of HBOS was nothing of the sort. Whose responsibility that was - Sir Victor Blank, the government, highly paid advisors, Eric Daniels, the rest of the board - will probably never be known and, arguably, is now irrelevant but one issue, which Mr Peston and other commentators have not addressed, is where HBOS, the banking sector and the UK economy would have been without that takeover. Lloyds stakeholders they might look at the situation and wish 'what if', but the remainder would breathe a huge sigh of relief and thank goodness that it was not 'what if it had not happened'.

    The scale of the ineptidude by HBOS management which resulted in the mind-boggling losses in that business would have had catestrophic effects if Lloyds had not stepped in. (Mr Goodwin has been vilified but his mistake was to hugely overpay for ABN Amro; Mr Hornby and his colleagues were arguably more culpable, creating an entire business model which was appallingly defective, and they have not been held accountable for that misjudgement. Those responsible are still very wealthy men.) Had Lloyds not intervened, the scale of the government rescue of RBS would have paled into insignificance against the level of support which would have been required to prevent HBOS going down the pan and, as such a major retail deposit taker and mortgage lender, the consequences don't bear thinking about. This is not a party-political issue; neither the Conservative party or the Lib Dems, however much they protest now, saw this coming or raised any concerns before the fat hit the fire.

    I'd be interested to see a dispassionate analysis of the position had not the takeover gone ahead. Whatever the criticisms of Lloyds and the government, what would have happened?

  • Comment number 83.

    Post 82 thanks for an insightful, calm, measured and straight down the middle post. If only there were more posters like you.

    To answer your question the position, as far as I am aware, would have been as follows.

    In the event of a failing bank the government will seek another financial organisation to take over the management and running of that bank. In many ways the Nationwide has done something very similar to a number of Building Societies.

    If the position is so bad that no one will take over the bank in totality the government will seek someone to take over the good parts and almost certainly have to absorb the bad parts. This is a situation very similar to Santander's takeover of parts of Bradford & Bingley.

    If there is no one prepared to take on even part of the organisation the government is left with two options.

    The first is effective nationalisation like Northern Rock.

    The second is to effectivelty allow the bank to fail and only bail out depositors inline with agreed limits. This would most likely lead to some savers losing some money and the banks shareholders and other creditors effectively getting nothing or very little back. You could argue that this was something similar to Lehman Brothers.

    In my very humble opinion the UK government could not have allowed HBOS to fail as it would have caused widespread financial carnage in the UK partly because of its huge share of the UK mortgage market and the huge amount of lending that had taken place to Corporate lenders be they property developers, owners or many other commercial customers.

    I would imagine there would be total financial chaos in the UK. As such in the absence of Lloyds coming to the rescue the UK government would have had little option but to effectively nationalise the bank as it did with Northern Rock.

  • Comment number 84.

    Um Robert..worst results eh ? Well the 24 billion of losses that are written off will never appear again.

    So despite your proclamation that these are one of the poorest set of figures, look ahead !

    A retail bank generating 18bn or thereabouts of profit, ignoring historical inherited bad debt, even allowing for the £6 bn of realignment.. might be a force looking ahead.

    Indeed, it can be argued that a profit of £12 bn is one of the best around.

    Of course that doesn't make a good headline ... 2010 wil be an interesting set of results, but if write offs do not progress at £2 bn per month, we will not see the same next year.

    Once again you write an article to grab the headlines, underneath it all, Lloyds are a profitable organisation, who are clearing out historical problems elsewhere.

    As for lending to SME's you can pull the figures, any way you want, who would want a state owned bank lending to business on a wing and a prayer, providing funds in that situation is only a path to hell, as proved by HBOS management.

    When the write off's diminish, you are left with a profitable organisation.... don't forever talk down, the wealth of the nation.

  • Comment number 85.

    79. At 10:28pm on 26 Feb 2010, Ilovecans

    I'd rather woo and other unsubstantiated belief systems had been left where they belong and out of how we run our economy. If you really believe you make your only luck then the converse of your beleif must also be true. You might feel lucky, but I wonder what they plumber, the hairdresser, the bank teller did to bring on the bad luck of unemployment? There is no evidence to support 'luck' or lack of it, but there is plenty of evidence to point towards the unregulated antics of the financial industry.

  • Comment number 86.

    82. At 11:52pm on 26 Feb 2010, twsltd

    Toynbee and Walker studied the views of City whizz kids in 2007.
    They believed the following:
    6% of earners more than them (they were in the top 1% earners)
    They work harder than anyone else and deserve their money; average hours in their industry was 34, comparable with the UK average of 33.9 hours.
    They estimated the top rate of tax (40%) was payable by those earning £162 000 and above. True figure was £38 250
    A poverty wage was £22 000. That amount was just under median gross earnings in the UK.

    It might not be important for a banker to understand the difference bewteen an iceberg lettuce and a cos lettuce, but surely they understanding the financial situation of the population they are selling loans, insurance, mortgages and credit cards to?

    These people really think 6% of the population make more than they do!
    Why didn't Fred the son of an Paisley electrician do anything about that sorry state of knowledge in his industry?

    From what I've seen, not one single bank or finance organisation begged to have tight regulation of the financial industry over the decades. Lloyds is a major player in the financial industry, yet it failed to fight and win a long-term future for that industry structure via regulation. History tells us that banks will destroy themselves and their economy unless they operate within tight regulations. You'd think being so super bright, the banker whizzes would have known all that and not need us plebs out here in the real world to remind them! It's beyond me, I'll never understand why directors failed to plan for the long-term and ensure their staff did so too.

    RBS owned RBS Greenwich Capital and that little part of the empire was one of the top underwriters of CDOs - that gave massive losses when it all went woof. Then there was the liquidity problem Fred had created....and the £12bn share issue in April 2008. Now weren't the people in his risk management department just as badly treated as the due dilligence people?

    How much have Lloyds leveraged? Aren't they worried about their lending to Dubai? Where else have they invested? This is a global market and a global recession. Where are they susceptible? And then there is the recent massive rights issue - remind me, what did Fred do to save his RBS? There are fears of a double-dip, and given the mess of the financial sector no one knows who owes what to who with all the complexity. Maybe once that is understood over the next few years, we may find Lloyds is in tip-top shape, but somehow...

    I suspect there are now parts of Britain full of families where the financial industry will be despised as much as Thatcher. For generations.

    Where is the regulation? Have they woken up and begged for it? How many of the bonus winners returned the money to pay off the debt? None. Have all the banks and finance industry on earth, including Lloyds told all their traders they ae now on the same salary as a branch teller?

    Lloyds was part of the system. Lloyds is still part of the same system, the system that has gone off on yet another party.
    That seems understandable to many, many people.

    As to the what-if. I've no idea myself though I think the suspicion is that the global banking industry would have ceased up had HBOS gone down. The dominoes would have followed, the ATMs would have no money in them and we'd be stuffed. I've asked around and to my amazement no one seems to think there is a government emergency plan. We have plans if there is a massive disaster to kick start the emergency services etc. If there was a dirty bom the army would probably be asked to seal off the affected area etc, yet we have no national emergency plan for a run on the banks. Not as far as I've been able to find out.

    If the run on them all had kicked off, the inter-bank loan system would probably still be frozen to this day.

    Perhaps the point is no one knows and no one was prepared to find out.

  • Comment number 87.

    73. At 9:06pm on 26 Feb 2010, jamiewest wrote:
    Surely it is a bit odd to look at the losses but not take into account the offsetting goodwill credit relating to the acquisition of HBOS. It is clearly stated in their results announcement today.

    If the numbercrunchers have started to treat goodwill as profit then we are in worse trouble than I thought.
    I presume the £11.2 billion 'gain' is the difference between is the excess of what someone considers the fair value of HBOS assets over what Lloyds actually paid for it.
    It does beg the question if Lloyds made such a good deal, why are they in such a mess?

  • Comment number 88.

    * 86
    despised more than thatcher they will be but they will pay. anyone under water now and in the future will default as the banks themselves have set the example that there is now no shame in being financilly incompetent.

  • Comment number 89.

    Alesha Soba #87: excellent question. People have a strong cognitive bias leading them to focus only on losses and ignore gains. Robert made exactly the same omission in his previous RBS post - explaining that £25 bn of investment had increased equity by only £16 bn, but without noting that the taxpayer has bought an £80 bn asset for just £45 bn.

    So actually, even though Lloyds and RBS have both made big losses, these were already factored into their prices and neither is in a dreadful position any more.

    This shows up in all walks of life - e.g. people will spend much more time to contest a £50 overcharge from a supplier than they will spend to earn £50 from a customer. Those who can see through this and be more rational will tend to make more money.

    p.s. liked your AccountingWeb posts!

  • Comment number 90.

    All is now clear.

    I own a small business and have an overdraft facility with Lloyds banking group,which expires today.My bussines relationship manager has been very pro-active almost to the point of bullying by gaving me 3 choices this week:

    1] Condition of renewing the overdraft facility would be by reducing it monthly with quite substantial payments.This would in effect starve the business of cash flow and force us to go under.So not a viable option.

    2] To convert the overdraft into a business loan with a whopping 16.9% apr.Good for the bank,easy money.

    3] In the words of the enterprise tsar' Lord Sugar of Clapton ' there ain't one.

    I'm told the resaon for the high interest rate is that the bank has rated it as high risk and speculates it's probability factor of failure and so the rate reflects the banks risk to reward.This is the new progressive responsible lending policy as endorsed by the great leader himself, Gordon Brown.

    A clear indication that this bank is only interested in it's very own survival and despite all the billions of tax payers cash,it still isn't functioning as a financial institution to release the flow of credit that small businessess so desperately need in order to exist,develop and expand and ultimately lead this country out of recession.

    Shame the government don't act upon it's own measures and start reducing it's ballooning national debt.

  • Comment number 91.

    82 and 83

    Admirable posts as they are you both come to the conclusion that it was in the national interest for the Lloyds takeover to take place. You (Ian) talk about Lloyds coming to the rescue.

    I am wholly against that stance given the motivation for the takeover was wholly political. It is not the position of any government to blatantly use one publically quoted company to save (rescue) another from collapse. It was clear from the beginning that the driver was Gordon Brown - he has said as much. And the two main characters (Blank and Daniels) went along with him in total disregard for the interests of their shareholders. They were not elected to save HBOS at the expense of Lloyds but that is what has happened. I am amazed that the big shareholders in Lloyds TSB have taken it so quietly but their collective role in the takeover (particularly those with shares in both banks) is probably just as despicable as the role of the Board.

    You (twsltd) note that "There is no doubt that the due diligence which took place prior to the takeover of HBOS was nothing of the sort". What is the process about other than to protect the shareholders (in this case of Lloyds) from management buying a pig in the poke? As they did. It goes right to the heart of a political decision breaking every rule of how companies should behave, and had it occurred in any other circumstance would have probably led to the most stringent sanctions from government. And quite possibly the Board being sued for negligence and failing to act in a proper manner.

    The political stitch-up, which is what this was, must have had characters from right across the piece closing their eyes to all the rules set out to regulate publically quoted companies. How would anyone working to a competition brief allow the bid of this order to go forward without there being political pressure for them to turn a blind eye. Which they did. In UK and in Europe.

    Yet one of the worst aspects of this tawdry tale is with the way in which the same government has imposed penalties on Lloyds for exiting the Asset Protection Scheme, a scheme they would never have needed without the government inspired takeover.

    It is all water under the bridge, hence my earlier piece being about how I thought the story would be told at some time in the future. It was also tinged with the irony of Daniels being awarded a bonus of over £2m for what he thought was a master stroke. In my view this takeover should never have been allowed to happen in the way it did, because it was doomed from the start. Yet people talk about cleaning up the banks and having business decisions taken on business grounds. Not with this one.

    I have no doubt that the Government had to rescue HBOS, but not in the way they did. Yes, I do own shares in Lloyds, and have lost a fair amount of money. No problem with that - I have owned shares since the 1950s, so I fully realise that you can lose money on owning shares and you have to be ready to do so. But as far as I know I have never lost money in the way that I have over the Lloyds takeover of HBOS. I believe it was deceitful and inept, pure and simple.

    PS as far in the inept bit is concerned, if anyone has the slightest idea about how the books of LLoyds Banking Group stand at the moment (including the Board, the Auditors, and the Government as 41% owners, then I would regard that as something of a miracle.

  • Comment number 92.

    Lloyds: Is it doing enough for Britain?

    Is McBully doing enough for Britain - if he was, Lloyds would not even be an issue?

  • Comment number 93.

    We bemoan the high bankers bonuses (me too) but I have no idea the kind of model used to calculate them and in truth if is fair or not. I wonder if Robert could let us know just how a decision would be made to give a bonus of £1 million+

    Do they have to have made (say) £100 million profit for the bank
    Have outperformed the market by 20% for their area (which could still have resulted in a net loss)
    Or something else...?

    Also (given that Lloyds made a massive net loss) what happened to the others. Were 70% (?) of the traders fired or did they just not get a bonus?

    Perhaps you could clarify, what the system is, so we can take a view on its real fairness?

  • Comment number 94.

    I see that Kettle Foods maker of Kettle Chips has been sold to a US company by its private equity company owners.

    It's not just banks that are unhelpful to Britain.

  • Comment number 95.

    A lot of comments have been made regarding losses and bonuses (right or wrong). There are other costs that have contributed to this huge loss - bad debts. Some of these are genuine customers but a large number are greedy borrowers who have lived excessive lifestyles that they could never afford (big houses, new cars, posh holidays, new kitchens, new furniture, etc, etc - ring any bells?)and now won't pay it all back rather than can't by hiding behind the IVA legislation. Some of these we will personally know but will not be aware of their situation although their names appear on the insolvency register. Should we not make a more public list of these people who are also "robbing" us the taxpayer and hound them like we do the big bonus takers into ensuring they pay every last penny back rather than a fraction no matter how long it takes?

  • Comment number 96.

    SME lending is shocking. Both LBG and RBS are both on the campaign trail to try and get a message over that they are doing their bit. They aren't, and very very far from it.
    The problem with schemes such as EFG is that they are being allowed to interpret the rules for acceptance pretty much any way they please to ensure applicants don't meet their acceptance rules, and they are getting away with it.
    Some of the reasons I've heard from people who have been turned down are so at variance with the published rules for acceptance that you wonder if in fact the banks are operating the same scheme at all.
    Somebody in government needs to stand up, and stand up now, and make these banks actually do what they are saying they are doing. But it seems nobody has the balls to do so.
    Sadly even if they did, it'll be too late for very many businesses.

  • Comment number 97.

    We the taxpayers own a large percentage of Lloyds and even more of RBS. Why are we(the taxpayer) not represented on the relevant boards in the same percentage numbers therefore controlling what goes on in the policies of these banks (including bonus awards). Surely this is what happens in normal commercial takeover situations. To have a very large controlling interest in a bank and then let them do as they like seems to me to be financial incompetence of the greatest order.

  • Comment number 98.

    Here's an interesting thought. There are very many good businesses closing through lack of credit.
    It's not their fault that that credit isn't available to them. It is there, but the banks are actually choosing not to allow them to access it.
    In these circumstances, the businesses are in fact blameless for the position they find themselves. It's not through any financial incompetence on their part.
    If they have existing borrowings, which they could, if the system wasn't broken, traded away quite happily, who then should carry the can when the business closes.
    In my mind it should be the banks. They are charged with running the system (no one else can) but they are choosing not to.

    Don't even try to get your head around the reasons why they might choose not to. In any sane world it simply doesn't compute.

  • Comment number 99.

    I write with reference to post 97.

    This is the irony and hypocrosy of this Labour government and Browns stewardship of the bank bailout.He wants us to do banker bashing and yet we the tax payer own 84% of RBS.

    Alastair Darling as Chancellor of the Exchequer is our representative of UK tax payers of UK Financial Investments (UKFI) on the RBS board.

    On our behalf he has awarded the 1.3 billion RBS bankers bonuses.

    Maybe that's what Gordon Brown means by a 'Future Fair For All'.

    I have a petition @ no10 against bankers bonuses:

  • Comment number 100.

    94. At 1:15pm on 27 Feb 2010, Wee-Scamp wrote:
    I see that Kettle Foods maker of Kettle Chips has been sold to a US company by its private equity company owners.
    It's not just banks that are unhelpful to Britain.
    From FT:
    Diamond, which produces Emerald nuts and Pop Secret microwave popcorn, is seeking to raise $600m of debt to finance the deal, which is being arranged by Bank of America and Barclays Capital.

    I still do not understand how it is possible to borrow the whole purchase price, surely that is like a 100% mortgage but with less security.


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