British bank Lloyds predicts return to profit in 2010

Partly-nationalised Lloyds Banking Group yesterday forecast that it will return to profitability in 2010 and reported strong trade in the first few months of the year.

"In the first 10 weeks of 2010, the group's trading performance has been strong and we are pleased with the group's performance against each area of recent guidance," Lloyds said in a trading update.

Lloyds, which is 41.3 per cent owned by the British government after a huge bailout, had suffered a loss of £6.3 billion last year, as bad debts surged 60 per cent following the takeover of former rival HBOS.

The pro forma loss, equivalent to €7 billion or $9.6 billion, was an improvement from the shortfall of £6.7 billion faced in 2008.

"Overall the group believes that it will be profitable on a combined businesses basis in 2010," the bank added in the statement, which was issued ahead of an investors' conference in London next week.

It added: "Costs have remained well controlled and are lower than the equivalent period in 2009.

"Impairment provisions are currently trending at lower levels than anticipated and as a result the group now expects to deliver a better impairment performance than previously guided."

The government has a large stake of Lloyds after a massive bailout following last year's takeover of HBOS, which was saddled with toxic or high-risk investments in the housing and commercial property sector.