Lloyds Banking Group has said its HBOS division made a hefty loss last year due to bigger than expected bad loans, sending its shares down by a third.
HBOS had a pre-tax loss of £8.5 billion for 2008, Lloyds said, driven by £7 billion in bad loans at the bank's corporate division and a further £4 billion in asset write-downs.
In November, HBOS had estimated its bad debts at just £3.3 billion. Lloyds said the big rise in bad loans and write-downs was driven by falling asset values as markets continued to deteriorate.
It said the increase also reflected the application of Lloyds own 'more conservative' accounting methods at HBOS since the two banks joined forces late last year.
Lloyds Banking Group's Lloyds TSB unit made a profit of about £1.3 billion, the company said.
