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Lloyds: Proft Warning On Irish Bad Debts

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http://ftalphaville....luck-of-lloyds/

Therefore, the Board anticipates that, compared to 30 June 2010, approximately a further 10 per cent of the £26.7 billion Irish portfolio will become impaired by the 2010 year end. Furthermore, the Board believes that it is prudent to increase the level of provisions against the portfolio, and currently anticipates an increase in the impairment charge relating to Irish exposures for the full year 2010 to approximately £4.3 billion on a combined businesses basis. This would result in an increase in provisions as a percentage of impaired Irish loans to approximately 54 per cent at the 2010 year end.

Which means the bank will have to set aside a further £4.3bn on a combined business basis to cover impairments relating to its Irish exposure.

Read-across to RBS: RBS has a £55bn loan book in Ireland, with a 9% credit loss reserve / loan ratio vs 29% at Lloyds. Credit quality performance in Ireland at Lloyds has to date been worse than at RBS, but a simple mechanical read-across to Lloyds' announcement would imply an incremental £11bn P&L impairments for RBS from Ireland = 10p off book value per share.

I'm sure Hector (the tail that wag the dog) and Lord Turner will be 'negotiating' hard to ensure their bonuses are non-existent and deciding who needs to be remanded in custody. Oh ok then, they'll be waiting to be told who is going to get the £7,000,000,000 of fraudulent handouts from the taxpayer.

Edited by Red Karma

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http://ftalphaville....luck-of-lloyds/

I'm sure Hector (the tail that wag the dog) and Lord Turner will be 'negotiating' hard to ensure their bonuses are non-existent and deciding who needs to be remanded in custody. Oh ok then, they'll be waiting to be told who is going to get the £7,000,000,000 of fraudulent handouts from the taxpayer.

Presumably these loans are old HBOS ones?

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Yep, saw this. I got in on Lloyds at 64.2p and they're almost right back down now. Long-termer, though...

Not good news all round... can't imagine they'd want to support HPI with these consequences.

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13:58, Friday 17 December 2010
LONDON (
Reuters
) - Part-nationalised bank Lloyds warned on Friday that it would take a further hit from
impairments
on its Irish portfolio as a result of Ireland (Berlin: IIK.BE - news) 's economic and fiscal deficit problems.
The update on its Irish exposure caused Lloyds shares to fall sharply, dragging down other banks such as Royal Bank of Scotland (LSE: RBS.L - news) , which is also exposed to Ireland via RBS' Ulster Bank unit.
Lloyds shares were down 6 percent at 64.8O pence by 1:40 p.m., while RBS shares fell 5 percent.

"impairemnt" -- sounds better than "loss" I suppose.

Surprised this didn't take thjeir shares higher gfiven the contrary nature of the market post collapse of the banks. After all, bonuses are paid on losses as well as gains and if the losses are big the bonuses are big and so forth. Win win for the banksters.

Edited by Realistbear

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Alphaville missed out the best bit

RNS Number : 2044Y

Lloyds Banking Group PLC

17 December 2010

Notes to editors:

Our portfolio in the Republic of Ireland comprised £26.7 billion of loans and advances to customers at 30 June 2010. These are being run off following our announcements in February 2010 of plans to close our retail and intermediary business in the Republic of Ireland, and in August 2010 of the transfer, subject to the necessary approvals, of the Bank of Scotland (Ireland) business to Bank of Scotland plc.

Within this portfolio, £11.7 billion of loans and advances were impaired at the half year, with impairment provisions accounting for 42 per cent of impaired loans, or approximately £4.9 billion (including the £1,557 million provision taken in the first half of 2010). Commercial Real Estate accounted for 42 per cent of assets (approximately £11 billion), with the balance of the portfolio broadly evenly split between loans and advances to Corporate customers and to Retail customers. Within Commercial Real Estate, 54 per cent of loans were for property investment, of which 45 per cent were impaired at the half year, and 46 per cent for property development, of which 90 per cent were impaired.

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=10743459

About 70% of their impairments are in property £7 billion or so. give or take a billion.

I'd like to know how they value their commercial real estate and how much it is worth on the open market at arms length.

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Yep, saw this. I got in on Lloyds at 64.2p and they're almost right back down now. Long-termer, though...

Not good news all round... can't imagine they'd want to support HPI with these consequences.

I don't want to sound rude but why when you believe that house prices are going to crash (which i suppose you do as you have thousands of posts on here) do you own shares in the likes of Lloyds and BDEV?

These two will surely be the biggest fallers when the crash gains some momentum?

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I wonder when we'll be treated to Lord Turner's summary report into Bank of Sh1t's commercial lending:-

Something along the lines of:-

"The FSA have looked into the matter and Mr Cummings seems like a very nice man. Case closed."

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Another classic exchange on FTalphaville's markets live.....

I think LBG can handle it under current circumstances. They are quasi monopoly and will earn their way out

Their pretax preprovision income on lending is around £12bn per year (last H1 result x 2). The trading profits roughly pay

for staff overhead etc.

So, provision another £2.7bn isn't going to kill them and BoE will give them plenty of time to carry-trade itself to profitability.

Of course it is you and me who will be paying for these mess via steep banking pricing and inflation.

The US used the same strategy during the Latam crisis in the 80s and the banks turn out to be just fine in the end.

Edited by easybetman

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  • 284 Brexit, House prices and Summer 2020

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