In These New Times

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Ireland, land of impairments for RBS and Lloyds

Posted by seumasach on February 25, 2012

Both banks raced headlong into Ireland in the run up to the 2008 crisis and have been left with loans that can no longer be repaid and in some cases on land that is no longer earmarked for development

Guardian

24th February, 2012

Lloyds Banking Group and Royal Bank of Scotland have taken a combined hit of almost £20bn from bad lending inIreland since they were they were bailed out by the taxpayer in October 2008.

Both banks raced headlong into Ireland in the run up to the 2008 crisis and have been left with loans that can no longer be repaid and in some cases on land that is no longer earmarked for development.

Lloyds, 40% owned by the taxpayer, today admitted that it had taken a £3.1bn provision for Ireland in 2011 – out of a total charge of £8.7bn for the entire bank – taking the total level of bad debt charges for Ireland to just over £8bn since the portfolio of loans started to rapidly turn sour two years ago.

In total, Lloyds has £10.2bn of impairments against lending to Ireland.

When RBS reported its figures for 2011 on Thursday, it disclosed a clean-up bill for its Irish business – including Ulster bank – of around £10bn. Stephen Hester, RBS, chief executive described the bank’s “least wise decisions” as being linked to property loans in the UK and Ireland. The former Celtic Tiger economy, he said, was “worst of all”.

Lloyds confirmed that the bill for Ireland was entirely the result of its rescue takeover of HBOS in September 2008.

While Lloyds said there are signs of improvement in Ireland – and the latest £3.1bn provision is down 25% on last year – it still increased the value of loans classified as impaired by £1.9bn – indicating that further problems could be coming.

In total, of the £24.7bn of loans it has listed to Ireland, it has made bad debt provisions against some £16.3bn.

Of the £10.8bn of loans granted to commercial property, some 90% are now deemed to be impaired. In the corporate loan book of £6.8bn, some £5.1bn are described as impaired while in the retail business – which is almost entirely a mortgage lending operation – some £1.4bn of the £7bn of loans are impaired.

In total, since the takeover of HBOS, Lloyds has now taken impairment charges of £48bn as the £8.3bn for 2011 comes on top of £24bn in 2009, £13bn in 2010.

The total clean-up bill raises even further if integration and othe costs are included. RBS has put its total salvage bill at £42bn

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