http://business.timesonline.co.uk/t...ectors/banking_and_finance/article5726132.ece
Shares in Lloyds Banking Group plunged 40 per cent this afternoon after it revealed a £10 billion black hole at HBOS, the struggling bank that it rescued last year.
Lloyds Banking Group, which is 43 per cent owned by the taxpayer, fell by 30 per cent to close at 60.9p, following the surprise announcement.
The Lloyds statement said that trading at HBOS had worsened in December, driving its losses up by a further £1.6 billion to £10 billion. Minutes after the warning, the shares fell as much as 40 per cent to 54.p.
The statement today appears to contradict assertions made by Sir Victor Blank, the chairman of Lloyds Banking Group, who told Sky News when the merger was finalised in January: "I believe everything is out there as far as HBOS is concerned. They've made three or four statements over the course of last year explaining exactly what their financial position is."
However, Lloyds said today: "Sir Victor was referring to the trading statements made in 2008 by HBOS, the last of which was released on December 12, and covered the first 11 months of the year.
“Today's trading update refers to the full year, and also reflects the more conservative provisioning methodology used by Lloyds TSB which has been applied in this case.
"It is no secret that the UK economy continued to decline in December, and this was reflected in today's numbers.”
At the pre-merged Lloyds TSB, profits reached £1.3 billion for the 12 months to December 31, and it "traded profitably and satisfactorily” in 2008.
Lloyds Banking Group said that the huge losses at HBOS owe to a £4 billion "impact of market dislocation" and about £7 billion of impairments in the HBOS corporate division.
The merged group has received £17 billion from the £37 billion worth of taxpayer funds the Government has used to bailout the banking sector.
Eric Daniels, the group chief executive of Lloyds Banking Group, who told the Treasury Select Committee this week that he earned a "relatively modest" £1 million a year, said: "Whilst we recognise that the short-term outlook is more challenging, Lloyds Banking Group has the largest UK financial services franchise, with excellent long-term earnings potential.
"The group will provide an update to the market on 27 February 2009, and is already making good progress in integrating the two businesses."
This week, in an explosive hearing before the Treasury Select Committee, when Lord Stevenson of Coddenham, the former HBOS chairman, and Andy Hornby, the former chief executive, were questioned over the bank's near-collapse, it emerged that a whistleblower had raised concerns about the company's business model.
Paul Moore, the former head of risk, was dismissed by Sir James Crosby, the chief executive of HBOS at the time, and gagged to stop him speaking publicly.
However, he has since spoken out, and he gave evidence to the Treasury Select Committee about a number of warnings he made to the board about the risk strategy of HBOS.
After Mr Moore's disclosure, Sir James, a close ally of Gordon Brown, the Prime Minister, resigned from his post as deputy chairman of the Financial Services Authority, the City watchdog
Shares in Lloyds Banking Group plunged 40 per cent this afternoon after it revealed a £10 billion black hole at HBOS, the struggling bank that it rescued last year.
Lloyds Banking Group, which is 43 per cent owned by the taxpayer, fell by 30 per cent to close at 60.9p, following the surprise announcement.
The Lloyds statement said that trading at HBOS had worsened in December, driving its losses up by a further £1.6 billion to £10 billion. Minutes after the warning, the shares fell as much as 40 per cent to 54.p.
The statement today appears to contradict assertions made by Sir Victor Blank, the chairman of Lloyds Banking Group, who told Sky News when the merger was finalised in January: "I believe everything is out there as far as HBOS is concerned. They've made three or four statements over the course of last year explaining exactly what their financial position is."
However, Lloyds said today: "Sir Victor was referring to the trading statements made in 2008 by HBOS, the last of which was released on December 12, and covered the first 11 months of the year.
“Today's trading update refers to the full year, and also reflects the more conservative provisioning methodology used by Lloyds TSB which has been applied in this case.
"It is no secret that the UK economy continued to decline in December, and this was reflected in today's numbers.”
At the pre-merged Lloyds TSB, profits reached £1.3 billion for the 12 months to December 31, and it "traded profitably and satisfactorily” in 2008.
Lloyds Banking Group said that the huge losses at HBOS owe to a £4 billion "impact of market dislocation" and about £7 billion of impairments in the HBOS corporate division.
The merged group has received £17 billion from the £37 billion worth of taxpayer funds the Government has used to bailout the banking sector.
Eric Daniels, the group chief executive of Lloyds Banking Group, who told the Treasury Select Committee this week that he earned a "relatively modest" £1 million a year, said: "Whilst we recognise that the short-term outlook is more challenging, Lloyds Banking Group has the largest UK financial services franchise, with excellent long-term earnings potential.
"The group will provide an update to the market on 27 February 2009, and is already making good progress in integrating the two businesses."
This week, in an explosive hearing before the Treasury Select Committee, when Lord Stevenson of Coddenham, the former HBOS chairman, and Andy Hornby, the former chief executive, were questioned over the bank's near-collapse, it emerged that a whistleblower had raised concerns about the company's business model.
Paul Moore, the former head of risk, was dismissed by Sir James Crosby, the chief executive of HBOS at the time, and gagged to stop him speaking publicly.
However, he has since spoken out, and he gave evidence to the Treasury Select Committee about a number of warnings he made to the board about the risk strategy of HBOS.
After Mr Moore's disclosure, Sir James, a close ally of Gordon Brown, the Prime Minister, resigned from his post as deputy chairman of the Financial Services Authority, the City watchdog
