Corporate lending fuelled HBOS's heavy losses
HBOS's disastrous 2008 losses were fuelled by one division in particular - its corporate lending arm.
The division, which has backed takeovers of businesses including building firms Crest Nicholson and McCarthy & Stone, suffered impairment charges of £6.6bn, constituting the bulk of the bank's £10bn plunge into the red.
The bad debts as a proportion of the division's loans jumped to 11.9 per cent, a dramatic increase on the 2.9 per cent seen the previous year.
The bank's new owner, Lloyds, said the writedowns followed a "more conservative" assessment of the corporate division.
The scale of the division's woes are mainly due to its heavy exposure to the hard-hit housing and commercial property sectors.
As head of corporate banking at HBOS, Peter Cummings was behind many of the bank's high-profile deals.
While the economy was strong, he was lauded as a star banker and admired for driving up profits, but now finds himself the latest financial heavyweight to be pilloried for risk-taking.
His penchant for not only lending money to clients but also taking an equity stake in their businesses, often commercial property, made HBOS more vulnerable when the downturn hit.
But Mr Cummings's enthusiasm for property meant he provided loans to housebuilders and property investors even as the economy contracted.
In February 2008, he is reported to have said: "Some people look as though they are losing their nerve, beginning to panic even, in today's testing real estate environment. Not us."
These words will have come back to haunt him as the extent of HBOS's losses became clear.
One deal which went bad was the 2006 acquisition of housebuilder McCarthy & Stone by an HBOS-led consortium, which has since seen the value of the investment plummet. It emerged today that ownership of the company has transferred to the company's senior lenders with a greatly reduced debt burden.
Likewise, the acquisition of housebuilder Crest Nicholson, bought in a 50-50 deal at the height of the property market, has been followed by financial restructuring at the builder.
The results mark a bitter end to the stellar career of the bank's "lifer", who was known as tough and plain-speaking, but well-liked.
He started out as a Bank of Scotland trainee, sweeping floors at a branch in Dumbarton on the outskirts of Glasgow. He began climbing the ranks, taking a secondment to do an MBA at Strathclyde University, and held a variety of positions at the bank.
In 2006 he became chief executive of corporate at HBOS - created by the 2001 merger of Bank of Scotland and Halifax - and held the post until last month, when he and other HBOS directors stepped down following the Lloyds takeover.
Despite his vast earnings over the years, the keen scuba-diver is reported to still live in a £300,000 house in Dumbarton.
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