Investors shouldn't take Lloyds' statutory figures too seriously - reflecting an £11.2bn fair value-related credit taken upon HBOS' acquisition last January, they don't tell the real story. Adjust for that and, on a combined business basis, the bank made a thumping £6.3bn pre-tax loss, only marginally better than the £6.7bn loss made in 2008.
Predictably, this mainly reflects the appalling state of HBOS' book. That meant a hefty £24bn impairment charge, up from £14.9bn a year earlier. In fact, £14bn of that charge relates to the group's wholesale operation, which primarily reflects bad debts in such operations as HBOS Corporate Real Estate - and although commercial property pain explains much of Lloyds' current woes, the impairment charge at the retail side also rose 14 per cent to £4.2bn. Stilll, the second half impairment charge was, at least, lower than the first half's and management expects that trend to continue.
There is, however, a long way to go before Lloyds is clearly back on track. After all, the retail pre-tax profit slumped 46 per cent in 2009 to £1.38bn and the wholesale operation reported a huge £4.7bn loss. The newly formed wealth and international unit - comprising asset management, private banking and international operations - also made a hefty £2.34bn pre-tax loss, compared to last year's £277m profit. And the insurance unit saw adjusted pre-tax profit fall 37 per cent to £975m.
Still, Lloyds did pull-off a conventional £13.5bn rights issue in December, along with a £7.5bn debt-for-equity swap. That allowed it to avoid the government sponsored Asset Protection Scheme , as well as the associated £15.7bn fee, and it stopped the government's stake from rising above the current 41 per cent level. The move also boosted Lloyds' core tier one capital ratio to 8.1 per cent - not the healthiest in the sector, but good enough.
Prior to these figures, brokers' consensus estimates were for a 2010 pre-tax loss of £2.7bn and a loss per share of 3.8p.
LLOYDS BANKING GROUP (LLOY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 54p | MARKET VALUE: | £ 35.9bn | |
| TOUCH: | 53-54p | 12-MONTH HIGH: | 76p | 18p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 11 | |
| NET ASSET VALUE: | 114p | |||
| Year to 31 Dec | Pre-tax profit (£bn) | Earnings per share (p)* | Dividend per share (p)* | |
|---|---|---|---|---|
| 2005 | 3.82 | 29.7 | 22.8 | |
| 2006 | 4.25 | 33.2 | 22.8 | |
| 2007 | 4.00 | 38.8 | 23.9 | |
| 2008 | 0.76 | 4.46 | 7.59** | |
| 2009 | 1.04 | 4.99 | nil | |
| % change | +37 | - | - | |
Ex-div:- Payment:- *Adjusted for rights issue **Half-year dividend only | ||||
