LLOYDS BANKING Group set aside a further £1.144 billion (€1.3 billion) in the first quarter of the year to cover bad debts on £27.6 billion in loans at its troubled Irish business, Bank of Scotland (Ireland).
The bank said its overall impairment charge was about £500 million higher than expected due predominantly to Ireland, where it expects commercial property prices to fall a further 10 per cent.
A further 7 per cent of the bank’s £27.6 billion Irish loan book had become impaired during the first three months of the year, the bank said, and almost 60 per cent of the book was now impaired. The bank has taken provisions amounting to 56 per cent of the impaired Irish loans.
This amounts to provisions of £9 billion on an impaired loans of £16 billion.
The bad debts on the Irish loan book during the first quarter compares with an impairment charge of £699 million in the first quarter of 2010 and £2.093 billion in the final quarter of last year.
Bank of Scotland (Ireland) has a heavy exposure to the Irish property sector, which grew under former chief executive Mark Duffy, who left the bank in 2009.
About a third of the loans at Bank of Scotland (Ireland) were property loans, a third on mortgages, most of which are loss-making tracker rate loans, and another third on business loans, a large proportion of which were for hotels.
Lloyds announced the winding down of Bank of Scotland (Ireland) as a licensed bank last year and the transfer of the existing business to Bank of Scotland in the UK.
The run-down of the bank is being led by Certus, a company set up by the bank’s former management headed by former chief executive of the bank Joe Higgins.
Lloyds, Britain’s biggest mortgage lender, set aside £3.2 billion pounds to settle claims that clients were improperly sold loan insurance, breaking ranks with British competitors.
The decision helped push Lloyds, which is 41 per cent owned by the British government, to a loss of £2.4 billion for the quarter compared with a profit of £169 million for the same period last year.
Antonio Horta-Osorio, who replaced Eric Daniels as chief executive two months ago, broke tradition by releasing the bank’s first detailed quarterly earnings. The share price fell the most in almost a year. (Additional reporting – Bloomberg)
