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Halifax Bank of Scotland's bad debts and other charges have risen by two-thirds in two months as corporate and consumer loans buckle under economic pressure.
The banking giant, whose shareholders yesterday approved its takeover by Lloyds TSB, said its charges for bad debts and asset devaluations were 8 billion ($21.7 billion) for the year to November 30, up from 4.8 billion at the end of September.
It also warned that more pain lay ahead, sending its shares down 23 per cent and hurting those of other British lenders. Shares in Lloyds fell by 18 per cent, RBS was down 15 per cent and Barclays lost 8 per cent.
HBOS, Britain's biggest mortgage lender, said the new losses would further reduce its capital ratios, although it had not yet quantified the deterioration. It said the decline in credit quality across its client base had accelerated, and estimated its assets had fallen sharply in value since last month.
"Global market and economic conditions, the UK recession and increasing unemployment will continue to present a particularly challenging operating and credit environment," it said.
Bankers say the worst could be yet to come as the financial crisis spreads throughout the economy. It is then expected to come back to haunt the banks through their customers' money troubles. Thus there is little scope for banks' business conditions to improve and some expect a renewed round of emergency capital raising next year.
HBOS said bad debts on its corporate loans almost doubled from 1.7 billion to 3.3 billion. Losses on the unit's investment portfolio also rose to 800 million from 100 million two months earlier.
Sharp falls in house prices and pressure on margins from interest rate cuts helped lift its impairments on mortgages from 400 million to 700 million.
- INDEPENDENT
