Lloyds ‘monitoring’ its Irish exposure

LLOYDS Bank has said it is “closely managing” its exposure to Ireland, after seeing its Irish-based loan losses increase by 14% year-on-year during the first half of this year.

Fri, 05 Aug, 2011 - 01:00

Geoff Percival

Lloyds acquired Halifax/Bank of Scotland in 2009 and is currently in the process of winding down that company’s Irish loan book, following Bank of Scotland’s decision to formally exit Ireland.

While total group-wide impairment charges to cover bad loans fell by 17%, to £5.4bn in the first half of 2011, Lloyds said the improvement would have been even better if not for a further deterioration in Ireland. Here, Lloyds’ first half impairment charge went from under £1.6bn to £1.8bn.

“In the first half, we have taken additional provisions in Ireland due to further falls in the commercial real estate market as previously anticipated. We believe that further vulnerability exists.

“A dedicated UK-based business support team is in place to manage the winding down of the Irish book,” Lloyds said in its interim results yesterday.

In all, as much as 64.1% of Lloyds’ Irish-based loan portfolio is now impaired. The group has a total Irish loan book of nearly £28bn.

Management added that it expects to further reduce total impairment losses this year, on an annual basis compared with 2010. It said, however, that any reduction depends on economic assumptions for both Britain and Ireland.

Lloyds’ latest results show an adjusted pre-tax profit of £1.1bn, marginally down from a profit of £1.6bn for the same period last year, but still ahead of market expectations. However, after compensation payments after insurance mis-selling, the group made a net loss of £2.3m for the six months.

Group chief executive, Antonio Horta-Osorio, called the performance “resilient” and said “substantial progress” had been made in de-risking and restructuring the business. Lloyds’ management is also confident of selling the 600+ retail banking branches in Britain, which it needs to under EU rulings and has already received a number of approaches for the assets.