Lloyds Bank to write off £13bn in debts

Part-nationalised British banking group Lloyds is set to write off up to £13bn (€15.1bn) in bad debts in results for the first six months of 2009, it was reported today.

The bank will take the huge hit on commercial property, business and mortgage loans turned sour, the Sunday Times reports.

Lloyds rescued beleaguered rival HBOS at the height of the banking crisis last year but total write-offs at Lloyds - 43% owned by the taxpayer - could top £20bn (€23.2bn) this year, the newspaper adds.

Analysts are expecting pre-tax losses of more than £6bn (€7bn) for the first half of the year alone.

Lloyds - which has already warned investors that it will be loss-making this year - said in May that corporate bad debts would be more than 50% higher than last year.

This is mainly due to the riskier property exposure in HBOS's corporate lending book, which booked a £6.6bn (€7.7bn) charge last year after the bank's new owner took a more conservative view of its debts.

However, the bank will also suffer higher defaults in its mortgage lending book this year as unemployment rises and more households are unable to make repayments.

Lloyds is still in talks with the British government about placing £260bn (€302.5bn) in toxic debt - mostly from HBOS - into a taxpayer-backed insurance scheme to strengthen its balance sheet.

The bank repaid more than £2bn (€2.3bn) to the taxpayer earlier this year after successfully raising £4bn (€4.6bn) to buy back expensive preference shares taken by the UK government in return for pumping in emergency funds in October 2008.

However, Lloyds chairman Victor Blank - who faced criticism for his role in brokering the HBOS takeover and weakening the conservatively run former Lloyds TSB - has agreed to retire from his post next year to placate angry shareholders.

A Lloyds spokesman declined to comment ahead of the results.