Could HBOS ruin Lloyds Bank?
There is speculation this evening that Lloyds Bank may need to be bailed out by the UK government after the revelation that newly acquired banking asset HBOS will deliver a £10 billion loss for the full year. The more conservatively administered Lloyds Bank is set to announce a profit of £2.4 billion for the year from existing operations but the HBOS nightmare will severely dent the company's long-term financial strength.
The situation with HBOS seems to have worsened over the last few months since the takeover was originally announced. It was also revealed that £7 billion over the £10 billion projected loss is the result of a write-down of corporate loans. The problem with corporate loans is the fact that we have yet to hit the bottom of the UK recession and there could be further write-downs to come.
This is a hammer blow for Lloyds bank shareholders and the government looks set to step in at some point in the short to medium term to take the bank under full government control. Many are now point the finger and various MPs and individuals who tried their best to stall the takeover, something which appears to have added to the problem.
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