Lloyds' Losses in the Limelight
It's been a turbulent time for Lloyds Banking Group recently and its share price has been fluctuating significantly as a result.
On Friday 26 February 2010, the bank announced a loss of £24 billion on bad debts in 2009, posting an operating loss of £6.3 billion. This was less than analysts expected but demonstrated just how acutely the pain of acquiring HBOS in January 2009 was still being felt.
Just over a year ago, on 13 February 2009, Lloyds revealed that losses at HBOS exceeded expectations at £10 billion, prompting Lloyds' share price to plummet by 34% to 59.3p. [1]
The latest revelation didn't have nearly such a calamitous effect on the group's share price – partly because it has been at a low level since Lloyds dodged the Government's Asset Protection Scheme by raising capital through a rights issue on 24 November 2009, and because the losses were widely anticipated this time around – but it did slip from 54.92p to 51.56p by lunchtime on the day of the announcement.
The bank is clearly cutting costs: further job losses were announced last week with trade union Unite putting the total headcount reduction in the past year at around 15,000. [2] On the day when the latest round of job cuts were announced, Lloyds share price rose by around 1.25%.
However, given the bank's exposure to the residential property market, last week's 1.5% drop in UK house prices for February as reported by the Halifax, their first monthly fall since June, will be unwelcome.
Finally, it emerged that Lloyds' chief executive Eric Daniels had been offered a £2.3 million bonus (which he chose not to claim) leaving shareholders wondering how performance is measured at the bank. The group seems to be unable to keep out of the headlines at the moment and this has translated into high volatility in its share price.
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Source: [1] Telegraph online (13 February 2009)
Source: [2] The Independent online (2 March 2010)
Updated 08/03/10