Wednesday, 5 August 2009

Lloyds Banking Group: Car crash success

Wow, what a set of results for the giant state-sponsored Lloyds Banking Group. For the first half of this year it has lost only £4 billion, less than the five analysts thought it would. Still much more than LLoyds thought it would but, hey so what? The shares have been up as much as 13% today.

That is a huge boom for a FTSE100 company. There must be some great high fives going on in the boardroom.

Quite how reality bites into this utopia is not hard to see. HBOS loans are approaching default rates of 8% - that makes Northern Wreck look sober and conservative. HBOS is a toxic virus which has invaded Lloyds and is right now trying to lay waste to its new host.

Lending as a whole is being shrunk in the current market, except for not very competitive mortgage deals. So much for the Government insisting on increasing lending to corporates.

Also there is the small matter of the negative goodwill (i.e. HBOS worth more than Lloyds accounted for). This can all be undone with future bad losses. It is more accounting hocus pocus.

At the moment in the market, everything is being read as a good sign, but LLoyds ain't healthy and won't be for years. That bodes ill for both the economy and the taxpayer

13 comments:

Steven_L said...

When I turned on the news the morning and saw £4 billion losses announced I thought my Lloyds position was a goner. Next thing I know and I'm £100 up!

Totally agree with the 'toxic virus' analogy, funny thing these markets!

Blue Eyes said...

Well the recession is over now, so surely most of these loans will now come good?

Bill Quango MP said...

Too right BE.
Go out and buy yourself a Plasma, everything is fine.

Nick Drew said...

is this still the same mangement that did 0 (zero) (nil) DD on the HBOS takeover ?

Nick Drew said...

update - sorry, it was apparently 5,000 (five thousand) man-days

they should sack those 5,000 men

Demetrius said...

Back on Friday 13 March, a good date that, I posted on Systemic Risk And The Circus and referred to Lloyds/HBOS. I still cannot comprehend how Lloyds or why they got into this. It was quite literally madness.

Anonymous said...

"Demetrius said...
Back on Friday 13 March, a good date that, I posted on Systemic Risk And The Circus and referred to Lloyds/HBOS. I still cannot comprehend how Lloyds or why they got into this. It was quite literally madness.

7:11 PM"

Could not MacDoom of MacDoom have just something to do with it, LLoyd's was not very keen at first, it seems that the Cons. and EU are muttering about splitting it up, for the sake of "competion"

CityUnslicker said...

Demetrius - Like BOA, Lloyds were chosen as the rescue vehicle.

Budgie said...

I was one of the few HBoS shareholders (only 2 per cent of shares) who voted against the merger. LLoyds did not deserve to be saddled with it; and if Brown had not intervened would not have been, either.

Having said that, HBoS was almost totally exposed to the UK housing boom, engineered by one J G McBust. The exposure was historical and they could not realistically change that much. Without McDebt's housing boom'n'bust HBoS would probably be still intact.

roym said...

Budgie,

no one held a gun to Hornby and told him to lend willy nilly though did they?

Budgie said...

It depends what you mean by "willy nilly". HBoS was at the conservative end of the lending spectrum and no more profligate than HSBC, Lloyds itself, and Barclays. It was, however, much more exposed to Gordoom's housing boom'n'bust simply as a result of its origins.

McDebt expanded the money supply at 10-14% for 8 years and this was soaked up by the property sector. A classic bubble as some warned. But their views were not in accord with the government's, and were largely ignored.

Unfortunately when propaganda is repeated over and over, as "no more boom and bust" was, especially when it seemed to be true for 10 years, it becomes difficult to resist.

Anonymous said...

"A classic bubble as some warned"

clearly not enough classically trained economists at HBOS then.

the whole rotten edifice should have been flushed away.
a second bank run would have taken the govt with it

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