HBOS merger with Lloyds approved as its bad debts soar
Shares fall 23% as bank sounds alarm over its loans
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Halifax Bank of Scotland's bad debts and other charges have risen by two-thirds in two months as corporate and consumer loans buckle under economic pressure.
The banking giant, whose shareholders yesterday approved its takeover by Lloyds TSB, said its charges for bad debts and asset devaluations were £8bn for the year to 30 November, up from £4.8bn at the end of September. It also warned that more pain lay ahead, sending its shares down 23 per cent and hurting those of other British lenders. Shares in Lloyds fell by 18 per cent, RBS was down 15 per cent and Barclays lost 8 per cent.
HBOS, the UK's biggest mortgage lender, said the new losses would further reduce its capital ratios, although it had not yet quantified the deterioration. It added that the decline in credit quality across its client base had accelerated, and estimated that its assets had fallen sharply in value since November.
"Global market and economic conditions, the UK recession and increasing unemployment will continue to present a particularly challenging operating and credit environment," it said.
Bankers across the City say the worst could be yet to come as the financial crisis spreads throughout the economy. It is then expected to come back to haunt the banks through the money troubles of their customers. This means there is little scope for banks' business conditions to improve, and some expect a renewed round of emergency capital raising next year. "The [HBOS] news is bearish across the sector," said Alex Potter, an analyst at Collins Stewart.
HBOS said bad debts on its corporate loans almost doubled from £1.7bn to £3.3bn. Losses on the unit's investment portfolio also rose to £800m from £100m two months earlier.
Sharp declines in house prices and pressure on margins from interest rate cuts helped lift its impairments on mortgages from £400m to £700m, the bank said. The unsecured impairment charge rose from £800m to £1bn.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments