Lloyds records 61% drop in impairment charges in Ireland

Lloyds Banking Group recorded substantially lower impairment charges in Ireland last year, with the rate of newly impaired loans stabilising.

The British bank’s annual results also show that it continues to reduce its footprint in Ireland. The bank set aside about £1.25 billion (€1.44 billion) to cover loan losses last year, down 61 per cent from an impairment charge of almost £3.2 billion in 2011.

The rate of increase in newly impaired loans slowed from 4.1 per cent to 1.6 per cent.

During 2012, the bank’s Irish loan book shrank from £24.8 billion to £19.5 billion. Some 85 per cent of the wholesale part of this loan book in Ireland is impaired, while almost a quarter of its retail lending is impaired.

Lloyds, the UK’s largest mortgage lender, is selling the Irish loans it acquired through its takeover of Halifax Bank of Scotland at the height of the financial crisis in 2008. Its gross loans and advances in Ireland fell by £5.2 billion last year, mainly due to write-offs of £2.5 billion, disposals of £1.4 billion and net repayments of £0.7 billion.

Total impaired loans in Ireland decreased by £3.9 billion, or 24 per cent, to £12.5 billion, with the reduction driven primarily by commercial and corporate loans.

Underlying loss

Lloyds made an underlying non-core loss of £1.39 billion in its international division, which includes Ireland. This loss narrowed 56 per cent on the previous year.

The bank said it was “pleased with the progress made” on its balance sheet reduction plans given “challenging market conditions”.

In its financial statement, the bank also noted that without a “definitive agreed and fully implemented solution to the euro zone crisis”, the ongoing uncertainty around the region’s economic outlook and the availability of credit could cause a return to recession in Britain and Ireland.