HBOS this morning warned that its bad debts and other losses, including property, this year had jumped by two thirds in just two months to £8bn just hours before a vote on its takeover by Lloyds TSB.
Investors were unimpressed with the £8bn charge, sending shares in Lloyds TSB down 17% to 131.2p and HBOS 23% lower to 67.8p..
In a trading statement released today, HBOS, which is one of two major lenders to UK property, said its impairment charges and bad debts had risen by £3.2bn since the end of September.
Impairment charges for mortgage borrowers falling into arrears had risen more than threefold since June to £700m, while those for unsecured lending in the 11 months to November was a larger £1bn.
In Peter Cummings’s Bank of Scotland Corporate division, the impairment charge in has nearly doubled since September to £3.3bn. ‘Recent pronounced falls in the estimated valuations of property and other investments have impacted significantly on the value of the HBOS investment portfolio with an estimated loss of £0.8bn for the 11 months to 30 November 2008,’ HBOS said. ‘Investment valuations are expected to remain under significant pressure in our private equity and joint venture businesses.’
The total amount HBOS is setting aside for bad loans and charges is now £8bn, up from £4.2bn at the end of September.
But HBOS remained upbeat about its future. ‘Through the injection of capital and liquidity facilitated by the UK government, both currently and going forward, HBOS remains confident in its ability to navigate through this difficult period, as it becomes part of the enlarged Lloyds Banking Group,’ it said