Lloyds’ Irish loans losses increase

LLOYDS Banking Group has reported a swing back into profit for the first half of this year, but also saw losses on loans in its Irish division grow significantly during the period.

The group — which is 41%-owned by the British government, but also controls the Bank of Scotland business — yesterday reported a pre-tax profit of just over £1.6 billion (€1.93bn) for the first half of 2010; a considerable improvement on the £3.96bn (€4.45bn) pre-tax loss it recorded for the same period last year.

However, while management is talking up an improved capital position — Lloyds’ core tier one capital improved to 9% over the first half — and a “more productive balance sheet” going forward, things don’t look as positive for its operations here.

Recent accounts for Bank of Scotland (Ireland) — Lloyds’ Irish business — showed the company made a €2.96bn loss last year (up from a €212m loss in 2008), boosted by impairment charges of €3.3bn, covering more than 10% of its Irish loan book.

Yesterday’s interim results from Lloyds — although not showing BoSI’s profit/loss figures — illustrated the total value of impaired loans in the Irish division were up by 20%, or €2.39bn, on a year-on-year basis in the first half of the year, to €14.1bn; covering 44% of the entire loan book here. Impairment provisions — to cover so-called “bad” loans — came in at just under €6.03bn for Ireland.

A general heightening in first half losses in Lloyds’ international business was down to higher impairment levels, “primarily in Ireland”, the company said.

The group said it remains “cautious” in its outlook for its international interests.

“Economic conditions have continued to deteriorate in Ireland in 2010, with concerns also existing over the outlook for the eurozone following the Greek crisis and subsequent contagion to Spain, Portugal and Italy,” it added.

“Further reductions are expected in the wealth and international impairment charge in the second half of 2010, although economic conditions continue to be monitored closely — particularly in Ireland,” it also said.

Lloyds also updated that the closure of Halifax Ireland — its retail banking arm here — is “progressing well”, with redundancy measures formally agreed with the unions.

The move resulted in 44 Halifax branches being closed and 750 jobs being lost, leaving the group with 850 employees in its business banking division.