Lloyds TSB Feels The Crunch

Lloyds TSB has admitted to a credit crunch exposure of £200m, which may seem huge, but is less than that of banking rivals Barclays and Royal Bank of Scotland. Lloyds expects is underlying profits to be in line with expectations.

Lloyds TSB, the UK’s fifth largest bank, said that it had limited its losses and remained firmly on track to deliver a solid performance for the year.

Swiss investment banking giant UBS felt the impact much more sharply, writing off another £5bn of investments connected to high-risk US home loans. The bank warned that I might suffer an overall loss for the year.

The £200m of writedowns by Lloyds encompasses an array of financial packages. Examples are a £90m exposure to Cancara, a ‘conduit’ company through which Lloyds raised short-term funds; an £89 exposure to mortgage-backed bonds; a £22m loss in structured investment vehicles.

Lloyds claimed that its operations has benefited from tighter mortgage controls, and has continued to grow its current account share of the market and has seen deposits increase. Another increase to its funds came from the sale of such businesses as Abbey Life which it sold for £977m to Deutsche Bank in July.

Chief executive Eric Daniels said: “Whilst no bank has been immune from the recent turbulence, the relatively limited impact of the market dislocation on the group has been more than offset by the significant profit on the sales of non-core businesses.”

There will also be an adverse effect on Lloyds TSB’s profits by its repayments on overdraft charges to customers. These cost it £36m in June, and a similar charge is anticipated in the second half of the year. Insurance claims from the flood problems in the June and July are also expected to hit the bank – to the tune of around £110m