Lloyds likely to post profit in first six months of `09
Lloyds Banking Group is likely to report a modest profit for the six months of this year despite enormous bad-debt provisions worth about 13 billion pounds.
London: Lloyds Banking Group is likely to
report a modest profit for the six months of this year despite
enormous bad-debt provisions worth about 13 billion pounds.
"Lloyds Banking Group could shock the market with its
first-half results by announcing that accounting trickery has
helped it scrape into the black.
"Despite enormous bad-debt provisions –- estimated at 13
billion pounds -– the bank is likely to post a modest headline
profit for the first six months of the year," The Sunday Times
According to the report, some of its most toxic sub-prime
investments have clawed back billions of pounds of value in
recent months. Other credit instruments will also have
recorded paper gains for Lloyds, it added.
"Under fair-value accounting rules, the paper gains will
flow straight through to the bottom line. The rules have
proved controversial throughout the credit crisis and have
been widely blamed for accelerating the destruction of value
on bank balance sheets," it said.
In the second quarter of the year, the prices of many
distressed assets bounced back.
"Lloyds is expected to be among the first of the world`s
big banks to chart big gains on the back of the rules now that
some troubled assets have increased in price," the publication
The report noted that Lloyds took 14 billion pounds of
provisions last year to account for mark-to-market movements
on its own balance sheet and that of HBOS.
Pointing out that even a small improvement could prove
significant, the newspaper said the same accounting principles
may allow Lloyds to release profits elsewhere on its balance
"Lloyds took a write-down of 13.8 billion pounds on the
HBOS loan book after the acquisition last autumn. Despite the
continued bad debts being suffered on the book, analysts
believe it could claw back some of those earlier charges," it
The accounting write-backs, coupled with operating
profits of seven billion pounds, would combine to outweigh the
enormous bad-debt charges being suffered on the bank`s
exposures to mortgages, corporate loans and commercial