Lloyds Banking Group has reported a £3.35 billion first-half loss today due to higher impairment chargest in Ireland and mis-sold insurance loans.
However, the loss was broadly as expected and the British bank reiterated its full-year guidance.
Excluding the £3.2 billion Lloyds had already earmarked to cover misselling liabilities, the bank's adjusted pretax profit was £1.1 billion, down from £1.6 billion a year earlier.
The bank's net interest margin narrowed to 2.07 per cent in the period from 2.12 per cent in the year-earlier period.
Lloyds, 41-per cent owned by the British government after a credit crisis bailout, said it had cut impairment charges on bad loans by 17 per cent to £5.4 billion although its Wealth & International unit reported a £2.1 billion loss, primarily due to higher impairment charges in Ireland.
Lloyds said impairment charges on its Irish loans rose to £1.78 billion in the first half, compared with £1.56 billion for the year-ago period.
Some 64 per cent of the group's Irish loans are now impaired and Lloyds said "further vulnerability exists" in its portfolio.
"Impairment coverage has increased in Ireland due to further falls in the commercial real estate market as previously anticipated," it said in a statement.
Bank of Scotland (Ireland), which is owned by Lloyds, has a heavy exposure to the Irish property sector, which grew under former chief executive Mark Duffy, who left the bank in 2009.
About a third of the loans at Bank of Scotland (Ireland) were property loans, a third on mortgages, most of which are loss-making tracker rate loans, and another third on business loans, a large proportion of which were for hotels.
Lloyds announced the winding down of Bank of Scotland (Ireland) as a licensed bank last year and the transfer of the existing business to Bank of Scotland in the UK.
Agencies