Lloyds blames HBOS for £4bn loss

Impairment charges jumped to £13.4bn, a five-fold increase on last year, with 80% owing to bad loans from HBOS commercial property assets. At the same time last year, before the HBOS takeover in January 2009, Lloyds reported a £2.8bn profit.

The group reported £18bn of gross mortgage lending for the first half of the year, which represented a 27% share of the UK gross lending market. This makes the group the biggest mortgage lender in the UK.

The average loan to value on mortgage lending was 58%, compared to 63% for the whole of 2008. Over 50% of the group's lending was for house purchases rather than remortgages. Unsecured lending balances were slightly lower which reflected lower customer demand.

The percentage of customers more than three months behind with their repayments has risen to 2.44% or 83,152 customers compared with 1.79% or 66,126 six months earlier.

Within the figure, 16,611 people with self-certified and sub-prime mortgages are in arrears. Some 25.9% of these households are in negative equity.

Buy-to-let mortgages also experienced a rise in arrears to 9,153 or 2.56% of all accounts from 1.96% six months earlier. Some 28.5% of buy-to-let loans are in negative equity, up from 21% six months earlier.

For prime loans, 57,029 customers are three months or more behind with payments and 18.5% of these customers are in negative equity.

The bank added that it expects to report a loss before tax for the whole of 2009 but has predicted charges for bad loans will be smaller for the rest of the year because it has finished going through the loans inherited through the HBOS takeover. The bank is also in talks with the government about the Asset Protection Scheme which will insure it against further losses from bad loans.

Eric Daniels, chief executive of Lloyds, said: "Our first-half loss was driven by the high levels of impairment. The core business delivered a resilient performance, despite the weak economy. We are successfully managing the short-term issues and are well positioned to outperform over the medium term, providing value to our customers and shareholders. Overall impairments in the second half of 2009 are expected to be significantly lower than the first half with progressive reductions thereafter."

The results contrasted with Barclays and HSBC which reported a combined profit of £6bn . Both banks refused to take taxpayers money to bolster their balance sheets.

Vince Cable, Liberal Democrat Shadow Chancellor, said: "This news comes as no surprise. We knew that Lloyds was opening a can of worms when it took over HBoS. But the real issue we now face is why banks are not lending. The Government must put pressure on the banks to start lending to sound and solvent companies, to prevent this recession becoming deeper and more painful than it already is."