HBOS pre-tax profit plummets 72%

by Gill Montia

Story link: HBOS pre-tax profit plummets 72%

HBOS, owner of Bank of Scotland and Halifax, has reported a 72% fall in pre-tax profit in the first half of the year.

Pre-tax profit plummeted to £848 million, compared with £2.96 billion in the same period of 2007.

Underlying profit before tax stood at £1.45 billion, a 52% drop on the same time last year.

In May of this year, the group wrote down £1.03 billion on investments linked to the US sub-prime mortgage market.

Margins were also affected by escalating bad debts, which rose 36% to £1.31 billion in the six months to the end of June.

Over the same period, the value of mortgages that the lender regards as impaired rose 21% to £5.1 billion.

The group says its £4 billion rights issue has left it better placed to operate in a more challenging economic environment; the cash call increased its Tier one capital ratio to 6.5%.

Yesterday, Lloyds TSB announced that its profits had fallen 70% to £599 million.

The bank took an £585 million hit on its portfolio of structured credit investments and the value of investments held by its insurance division declined £505 million.