Tens of billions more pounds were wiped off the London Stock Exchange yesterday, in the wake of Lloyds Banking Group (LBG) reporting its HBOS subsidiary made a £10.8bn loss last year.
LBG added that 2008 profits at its Lloyds TSB business were down 80 per cent at £807m.
The group is 43 per cent owned by the taxpayer, has received £17bn in state aid so far and is in negotiations for £250bn more support via the government’s Assets Protection Scheme that has taxpayers insuring banks’ ‘toxic’ assets i.e. worthless paper.
The results dragged the price of shares in Lloyds Banking Group down 26 per cent.
Unite trade union joint general secretary Derek Simpson said: ‘The huge losses announced by Lloyds Banking Group further illustrate the dire straits in which the financial system finds itself.
‘More than ever, it is essential that the new Lloyds Banking Group retains and protects its hard working staff.’
LBG said it faced another ‘challenging year’ in 2009 with chief executive Eric Daniels, warning that more than £100m in cost savings had been identified and there would be some staffing reductions.
He added that most of those were expected to be achieved through natural turnover and voluntary retirement plans.
Meanwhile, as the row over its former chief executive’s £16bn pensions continued, shares in Royal Bank of Scotland were down 17 per cent a day after it reported losses of £24.1bn.
Prime minister Brown threatened to resort to legal action after former RBS boss Fred Goodwin said he had no intention of giving up his £650,000 a year pension, insisting that City Minister Lord Myners had approved the pension.
GMB general secretary Paul Kenny commented on reports that Myners knew of the additional payment of £8m bonus into Goodwin’s pension pot.
Kenny said: ‘If reports are true that Lord Myners agreed that Sir Fred Goodwin should get a bigger pension than he was legally entitled to, or even worse if he did not check what sort of pension he was going to get, he should go.’
l Figures out yesterday revealed the US economy shrank by a huge 6.2 per cent in the last three months of 2008, a far sharper fall than had previously been reported.
A slump in exports and the biggest fall in consumer spending in 28 years (4.3 per cent down in the final quarter) dragged the GDP shrinkage figure down from the 3.8 per cent estimate given earlier.
Over the whole of 2008, the economy grew by 1.1 per cent the Commerce Department said, the slowest pace since 2001.
Exports fell at the sharpest rate since 1970 at an annual rate of 23.6 per cent, down from 19.7 per cent.
Meanwhile, Citigroup and the US Treasury have reached a deal that sees the government increase its stake in the ailing bank from eight per cent to 40 per cent.
Citi has already received $45bn in Treasury cash, as well as guarantees protecting it from the bulk of losses on $306bn of risky investments.
The latest agreement involves the government converting some of its preferred stock in Citi to common shares and is dependent on Citi raising extra private capital.