Lloyds’ chairman surprised at HBOS losses

by Gill Montia

Story link: Lloyds’ chairman surprised at HBOS losses

The chairman of Lloyds Banking Group has admitted that the pace at which HBOS’s losses have mounted has come as a surprise.

Speaking to the BBC, the outgoing Sir Victor Blank described the losses as “at the worst end of expectations”, adding that when the merger was announced in September of last year it felt like a “wonderful opportunity” rather than a “rescue”.

However, events in October led the Government to demand that banks hold extra capital and “the world changed”, according to Sir Victor.

The doomed merger between Lloyds TSB and HBOS has left the resultant Lloyds Banking Group 43% state-owned because of writedowns from the HBOS side of the business and Sir Victor has been heavily criticised by shareholders for allowing the deal to take place.

The group expects to be loss making in 2009, having posted a pro-forma loss of £4 billion for the first half of the year.

The bank took a £13.4 billion hit on bad loans “reflecting prudent valuation of HBOS’s commercial property related assets”.

Shareholders are currently considering legal action against the directors of Lloyds TSB and HBOS and their advisors, on the grounds that a lack of due diligence left investors with an unfair picture of the proposed merger.

The Government hurriedly brokered the deal in the wake of the Lehman Brothers collapse and the Lloyds Action Now group is demanding the release of notes on key conversations that took place between Prime Minister Gordon Brown and Sir Victor Blank, in connection with the takeover.