Outlook: No wonder Halifax Bank of Scotland has decided not to pass on all of last week's 100 basis-point cut in interest rates. Both margins and balance sheet are continuing to deteriorate at a rate of knots, evidently to the complete surprise of the management, who less than two months ago gave the impression that the worst is now known.
Not so. Yesterday's trading update revealed further impairment charges of £3.2bn, with the damage equally split between commercial and mortgage business. Lower interest rates will help ease the debt burden for customers, but for the bank they will only add to the pressure on net interest income.
The latest figures make it apparent beyond doubt that HBOS could not have survived as an independent bank, notwithstanding the billions of taxpayers' money that is being paid in as new capital. Even as part of the larger Lloyds Banking Group, it's going to be a struggle.
Further substantial bad-debt experience looks inevitable as house prices fall and unemployment rises. Only just-rebuilt capital ratios will again be under pressure, making it possible that the Government will have to stump up even more.
As it is, there will be no take up of the rights issues, either at HBOS or Lloyds TSB, leaving the taxpayer with a 43.5 per cent stake in the combined whole. The way things are going, the stake will soon be higher still.