A mountain of bad debts forced Lloyds Banking Group to announce annual losses of £6.3bn yesterday – but the part-nationalised bank refused to reveal details of its net lending or bonuses for bankers.
The deficit, which was 6 per cent lower than the £6.7bn loss reported in 2008, was caused largely by bad loans and charges stemming from its takeover of struggling rival Halifax-Bank of Scotland. These impairments soared by £9bn to £24bn, largely as a result of the loans that HBoS granted to commercial property ventures just before the bottom fell out of the market as the banking crisis struck in 2008.
However, the Lloyds chief executive, Eric Daniels, insisted the bad debts had peaked. He said overall losses on such loans had fallen by 21 per cent between the first and second halves of the year, although they rose slightly between the third and fourth quarters.
Lloyds's refusal to reveal details of its net lending and staff bonuses contrasts with other state-backed banks. Net lending is a particularly important indicator when assessing whether Lloyds has the met business lending targets that were set when the Government took a 41 per cent stake in the bank and told it to keep credit flowing during the recession.
Yesterday, Lloyds would say only that it had made available £70bn for business loans and mortgages. About half of that went to retail clients, with £10bn for small businesses and £25bn to corporate customers. On Thursday, Lloyds's part-nationalised rival Royal Bank of Scotland said that, even though it loaned £80bn during the year, its net lending was negative because borrowers were paying off their debts. Lloyds is unlikely to meet its target for lending to businesses.
Mr Daniels has already said he will give up a £2.3m bonus to stave off another row over bankers' pay. Lloyds, which does not have a large investment banking business, is expected to hand out much less in bonuses than the £1.6bn on offer at RBS.
The chairman, Win Bischoff, said he expected Lloyds to pay between £10m and £20m to the Treasury as a one-off "supertax" on bonuses. He said staff should feel able to take their bonuses, adding: "We must find a way whereby remuneration models are agreed and voted on by shareholders without executives being put in a position where they feel they have to waive their rewards."
He denied Mr Daniels had come under pressure to give up his windfall following similar moves at Barclays last week by its chief executive, John Varley, and president, Bob Diamond.
Mr Daniels, meanwhile, said he felt "no embarrassment" that £20bn of taxpayers' money had been pumped directly into Lloyds, together with the billions more in indirect aid and economic stimulus packages intended to keep struggling lenders afloat.
Lloyds's share price fell by 2.4p to 52.5p after yesterday's results, keeping the taxpayer's stake well under water. The Government paid an average of 74.35p for each of its 27 million shares, leaving it with a paper loss of about £5.9bn.
Mr Daniels he had raised his target for cost savings from £1.5bn a year to £2bn a year, but it was not immediately clear if this would require further job cuts. Headcount has already fallen from 120,826 to 107,144 during 2009.
Nic Clarke, an analyst at Charles Stanley, said: "Many shareholders who have held Lloyds shares for a number of years might not agree with the view of Mr Daniels that 2009 has been a success for Lloyds. Although the decision to purchase HBoS is now history, the acquisition is still having a big impact on the results."
Paying HBoS shareholders about half what that bank was worth last year meant Lloyds was able to report a statutory pre-tax profit of £1bn.
On Monday, HSBC will be the last big bank to report results for 2009. It has not said whether its chief executive, Michael Geoghegan, will take a bonus.