Lloyds Banking unveils £8.5 bln HBOS loss

Part-nationalised Lloyds Banking Group said its HBOS unit made a hefty loss last year due to a bigger-than-expected rise in bad loans, wiping a third off its value and raising fears more state help will be needed.

HBOS had a pretax loss of £8.5 billion for 2008, Lloyds said in a statement yesterday, driven by £7 billion in bad corporate loans and £4 billion in asset writedowns.

In December, HBOS had estimated its corporate bad loans for the 11 months to November 30 at just £3.3 billion.

Lloyds shares closed 32.5 per cent lower at 61.4 pence, having earlier fallen as low as 54.9 pence.

"Obviously we need to digest the detail, but it looks increasingly as if Lloyds HBOS will now go into majority public ownership, followed inevitably by nationalisation," said Vince Cable, finance spokesman for the opposition Liberal Democrats. The government owns a 43 per cent stake, after supplying £17 billion to the enlarged group.