LLOYDS REPORTS OPERATING LOSSES OF £6.3 BILLION - Lloyds Banking Group published their annual results this morning. The group was formed in January last year and its brands include Lloyds TSB, Bank of Scotland, Halifax, Scottish Widows and Cheltenham & Gloucester. It is 41% owned by the UK government. The group owns Bank of Scotland (Ireland) here, and its retail brand Halifax, which is being wound down. Lloyds says that impairment losses in its Wealth and International division - which includes the Irish operations - amounted to £4 billion sterling, compared to £731m in 2008, reflecting the significant deterioration in the credit risk environment in Ireland and Australia. The bank's operating loss for 2009 was £6.3 billion, slightly smaller than expected. It says customer deposits have decreased by 15% to £29 billion, primarily due to outflows in Ireland reflecting aggressive pricing from competitors who have also benefited from the Government's deposit guarantee here.
Kevin McConnell, of Bloxham Stockbrokers, says the results are reflective of the difficulties seen in the sector over the past two years, culminating in Lloyds making the announcement recently that it is withdrawing a lot of its operations in Ireland. He says the group's very sizeable loan losses - nearly £3 billion sterling on a £29 billion book - are very substantial in the context of how the bank's competitors have fared here.
Mr McConnell says that Lloyds has gone through a 'cleansing process' with everything out there at this stage. He says the group makes comments about the Government here making a 'credible policy response' and taking strong action on public sector wages, but the bank adds that it expects Irish GDP to remain negative until the latter part of 2010.
Bloxham Stockbrokers has carried out an extensive banking survey, on the day that NAMA is likely to be approved by the Commission. This is the second time the stockbrokers carried out such a survey and over 500 people took part. Mr McConnell says that 80% of respondents feel that the agency has and will improve sentiment towards the Irish economy. Importantly, institutional investors were even more confident in the agency's impact. As regards making a case for investing in Ireland, the stockbroker says that NAMA seems to a critical part of that.
***
MORNING BRIEFS - The European Commission is expected to approve NAMA later today. Then the transfer of banks' bad loans can get underway, starting with the loans of the major developers.
*** The two banking experts appointed by the Department of Finance to investigate the origins of the Irish banking crisis will name and shame individual banks when they report in May. Klaus Regling and Max Watson said they will look at the root causes of the collapse, but they will not name individuals. Speaking to the Oireachtas Joint Committee on Finance they said their mandate limits their enquiry to the period before September 2008, just before the Government introduced a guarantee for deposits held in Irish banks. Their report, along with a report from Central Bank Governor Patrick Honohan, will set the scene for a statutory Commission of Inquiry later this year.
*** The US Federal Reserve is looking into Goldman Sachs's role in arranging controversial derivatives trades for Greece, which helped it mask massive debt problems. Fed chief Ben Bernanke said it will look at a number of issues relating to Goldman Sachs and other companies and their derivatives arrangements with Greece. The Securities and Exchange Commission is also 'examining potential abuses and destabilising effects related to the use of credit default swaps and other opaque financial products and practices'.
*** The chairman of US bank Morgan Stanley, John Mack, has said that bankers are still paying themselves too much. Banks are reforming pay by focusing too much on structure - such as deferring bonuses to later - rather than the huge amounts being paid out, he said. His comments come after the figures this week showed Wall Street banks may have paid more than $55 billion in bonuses last year. Many of the banks that are paying bonuses to staff made losses during 2009 and were bailed out by taxpayers.
*** Royal Bank of Scotland, which is 84% owned by the UK government, said yesterday that it made a loss of £3.6 billion in 2009, but will pay £1.3 billion in bonuses to staff.
*** On the currency markets, the euro is trading at $1.3581 cents and 88.85 pence sterling.
