Lloyds, Britain’s biggest mortgage lender plunges to £3.5bn loss for 2011

Rising Funding Costs Imperil Profit in 2011

Part-nationalised Lloyds Banking Group said today that it is "in a significantly stronger position than it was 12 months ago" despite unveiling total losses of £3.5 billion for last year.The losses, which compare with a £281 million profit the previous year and are driven by a £3.5 billion hit to tackle the payment protection insurance scandal, are nearly twice the size of those at fellow state-backed bank Royal Bank of Scotland.

 http://www.independent.ie/video/video-world-news/lloyds-makes-35bn-loss-3030959.html
By  Gavin Finch in London at gfinch@bloomberg.net

Lloyds chief executive António Horta-Osório is cutting 15,000 jobs, on top of the 30,000 already axed. Photograph: Reuters

Former Chief Executive Officer Eric Daniels said, “We achieved a step change in our financial performance despite modest economic growth.” Photographer: Chris Ratcliffe/Bloomberg

Lloyds Banking Group Plc, Britain’s biggest mortgage lender, tumbled in London trading as the bank said rising funding costs will squeeze profit margins in 2011.

The net interest margin, the difference between what the bank pays for funds and what it charges for loans, will be unchanged in 2011, Lloyds said in a statement today. The lender is replacing government support with costlier wholesale funding.

“The numbers and outlook statement from Lloyds are a bit of a horror show,” said Ian Gordon, an analyst at Exane BNP Paribas SA in London with a “neutral” rating on the stock. “Lloyds’s second-half performance has been very weak.”

Analysts including Gordon and John-Paul Crutchley at UBS AG said they may cut estimates for 2011 pretax profit by more than 2 billion pounds ($3.2 billion), about a third. Chief Executive Officer Eric Daniels, who will be succeeded by Antonio Horta- Osorio next week, has been trying to wean Lloyds off state aid after the takeover of HBOS Plc in 2008 led to 13 billion pounds of losses and left the taxpayer owning 41 percent of the lender.

The shares tumbled 4.5 percent to 62.85 pence at the close in London, the biggest decline in more than three months.

“The knee-jerk reaction could be some disappointment,” said Cormac Leech, an analyst at Canaccord Genuity Ltd. in London who has a “buy” rating on the stock. “The biggest negative is that the margin will stay flat in 2011.”

Net Interest Margin

Lloyds posted a full-year net loss of 320 million pounds in 2010, compared with a 2.83 billion-pound profit in 2009, the bank said in the statement. Earnings the previous year were buoyed by an 11.1 billion-pound accounting gain on the HBOS purchase. Pretax profit slumped 62 percent to 609 million pounds in the second half of 2010 from the first half.

The net interest margin rose to 2.1 percent from 1.8 percent in 2009. Lloyds cut its reliance on government aid to 96.6 billion pounds in 2010 from 157.2 billion pounds in 2009.

The shares, the second-best performing of the U.K.’s five biggest lenders last year, may struggle to repeat that in 2011 as funding costs and Irish loan losses climb and a government commission weighs whether to break Lloyds up, analysts said. The Independent Banking Commission, which is reviewing competition in the financial services industry, will report in September. Lloyds said today it also expects a “slow recovery over the next couple of years” for the British economy.

“Another extremely challenging year lies ahead,” Gordon said. “There are still very significant bumps in the road.”

Halifax, Oil Losses

Lloyds posted its first full-year pretax profit since the credit crisis today. Profit was 2.2 billion pounds compared with a loss of 6.3 billion pounds in 2009. That beat the 2 billion- pound median profit estimated by 21 analysts surveyed by Bloomberg. Provisions fell 45 percent to 13.2 billion pounds in 2010 from 24 billion pounds in 2009.

Profit was crimped by a 4.3 billion-pound charge for bad loans in Ireland and a 365 million-pound loss on the sale of two deepwater oil drilling rig businesses to Seadrill Ltd. The bank also made a 500 million-pound provision to cover payments it’s making to Halifax mortgage clients because the terms of their loans were unclear.

Lloyds follows Royal Bank of Scotland Group Plc in posting an increase in losses from the implosion of Ireland’s decade- long real estate boom. Edinburgh-based RBS posted a full-year loss of 1.1 billion pounds yesterday, missing analyst estimates as Irish loan losses almost doubled.

“We expect to see further reductions in impairment losses in 2011 and beyond,” Lloyds said in the statement.

‘Radical’ Intervention

Pretax profit at Lloyds’s consumer banking unit rose to 4.7 billion pounds from 1.4 billion pounds. Profit was bolstered as customers reverted to standard variable rate mortgages, which generate more income than fixed-rate loans, Daniels, 59, said on a call to journalists today.

“The stand-out performance in the retail division will undoubtedly raise eyebrows, adding fuel to the fire of those that view the banking behemoth as an anti-competitive force,” said Paul Mumford, a fund manager at Cavendish Asset Management in London. “Increased profits will be met by increased enthusiasm for radical regulatory intervention.”

Daniels, who has overseen a 76 percent plunge in Lloyds share price since he took over as CEO in 2003, said he was “very pleased’ with his tenure at the bank. Daniels told the BBC Radio 4 Today Programme that he hasn’t decided whether to accept his 1.45 million-pound bonus for 2010 even though the board has made an award.

The bank’s core Tier 1 capital ratio, which measures financial strength, rose to 10.2 percent from 8.1 percent as risk-weighted assets declined by 18 percent to 406.4 billion pounds. Lloyds said it expects to meet its target to cut assets by about 100 billion pounds over the next three years.

“We achieved a step change in our financial performance despite modest economic growth,” Daniels said. “While the significant decrease in impairments was a key driver in our return to profitability, we also saw a good performance in the core business.”

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MCA do-or-die at 63 in sarong politics

MCA faces its biggest challenge

By FOONG PEK YEE pekyee@thestar.com.my

EVEN as the 3,000-odd MCA (Malaysian Chinese Association) delegates celebrate the party's 63rd anniversary at Wisma MCA  tomorrow, their minds are already on how next year's celebration will fare.

The reason for that is the do-or-die battle awaiting the party in the coming general election, and many see this as the biggest ever challenge faced by the party.

MCA, which won 46 seats in the last election less than half of what it used to win in the past elections will be deemed irrelevant if it slides further.

MCA president Datuk Seri Dr Chua Soi Lek, who described the current political scenario as totally different from the past, said there should be a sense of “crisis feeling” in the party to take on this challenge.

“We are talking about an Opposition which is more organised and committed and out to replace the Government.

“They will do anything and everything to wrest power,” he said when asked about his message for the delegates at the celebrations.

Of late, Dr Chua has made it a point to unmask DAP, its number one political enemy.

While the two Chinese-based parties have been arch rivals for decades, the war this time around is on a very different platform.

“The DAP today, which is a Pakatan Rakyat ally, is different from the DAP of yesteryears.

“It is not just working together with its Pakatan allies PAS and PKR to win seats but is also set to change the fate of the Malaysian Chinese,” Dr Chua noted.

He stressed that a vote for DAP is a vote for PAS.

To begin with, he said the DAP had always evaded the question of what would happen if Pakatan wrested federal control because DAP knew well that it would not have much say in the coalition.

For instance, he pointed out that DAP, which won 18 of the 31 state seats in Perak in the last election, had supported a PAS leader, Datuk Seri Mohamad Nizar Jamaluddin, to be the Mentri Besar, adding that PAS only won six seats while PKR won seven.

“DAP is nothing more than a political eunuch to PAS,” Dr Chua said.

He said the DAP had been planting hope in the minds of some 6.5 million Malaysian Chinese that the DAP's feat in Penang which saw its secretary-general Lim Guan Eng's ascension to the Chief Minister's post was possible in other states.

He reminded the Chinese that the Penang feat would not be possible in other states at the moment due to the demography of voters in the country.

Dr Chua also has a message for the delegates tomorrow the need to publicise what the party has done for the people and also what it can continue to do for them.

“I have the party's report card ready,” he said of the various people-oriented programmes implemented by the party since he took over the helm about two years ago.

And perhaps the Chinese saying chuang ye nan, shou ye gen nan (to build an empire is tough, to maintain an empire is even tougher) best sums up what the 63-year-old party is going through now.
The event will be broadcast live from MCA's internet platforms.

Those wishing to view the celebration can browse the MCA website at http://www.mca.org.my; official Facebook page at http://www.facebook.com/MCAHQ or Ustream Home at http://www.ustream.tv/user/mcatv. 

 Councillors go easy on Jessie

GEORGE TOWN: Penang municipal councillors have decided not to pursue legal action against Selayang Barisan Nasional coordinator Jessie Ooi for making baseless allegations against the council.

Selangor MCA Beliawanis chief Jessie Ooi >>

Their representative Ong Ah Teong said the councillors had unanimously decided not to pursue the matter and instead focus their time and energy on serving Penangites.

Ooi had made the allegations du-ring the recent televised debate between MCA president Datuk Seri Dr Chua Soi Lek and DAP secretary general Lim Guan Eng.

She had during question time alleged among other things that there were not enough parking lots in Lebuh Pantai and that enforcement personnel had assaulted people while performing their duties.

She had also accused the council of towing away cars at 10.30pm.

The council had clarified that 12 vehicles were towed away for illegal parking since the ruling was implemented in June last year.

Based on the council’s record, no vehicles were towed at 10.30pm and none in Beach Street as alleged by Ooi.

The council had explained there were 829 parking bays on Beach Street and adjoining streets and that its enforcement personnel had not assaulted anyone.

Meanwhile, Ooi in a statement said she regretted the “misunderstanding and confusion” caused by her.

“I admit that during the debate, the time for questions was limited and it was an intense affair resulting in me being emotional and not able to convey my message properly,” she said.

She said the council had the right and responsibility to correct or refute her remarks, but it should not prosecute her.

Ooi said the council’s threat to take legal action against her was an attempt at preventing the rakyat from expressing their views.

Society lacking even after 55 years

MALAYSIA, despite almost 55 years of nation-building, has degenerated into an intolerant and prejudiced society. Progress in education and economy has not made us think liberally and outwardly.

Oddly, we are not isolated from the world at large. We embrace globalisation, multi-racialism and world peace. Yet many of us remain parochial, as though shuttered from the changing times and new challenges.

There are still inward-looking people in our midst who are fond of objecting to a variety of things without justification or reason.

Perhaps it is their inbred attitude to complain, protest and threaten.

For example, even before the 1Care programme is finalised, there are already protests.

Against what?

In their insecure, selfish world, these objectors jump the gun by stirring up a storm in the teacup.

The 1Care programme will be conceptualised and proposed in a year or two.

At the moment, it is mere discussion and brainstorming. So why the hullabaloo?

There is this fear that workers will have their salaries deducted to fund the scheme.

The thinking is that 1Care should be offered free without any contribution by the employers and employees.

Any thought of this nature is only a pipe dream. Not everything is free in this world, not even water, clean air and nature’s abundance of crops.

Before Valentine’s Day, there was also strong objection to its celebration.

Isn’t love natural and universal? It is madness to stifle love. The world needs love, lots of it, to attain peace, harmony, unity and growth.

Politics and religion cannot be allowed to stamp out love, a force that is too powerful to be subdued or crushed. Love has existed long before political parties were created.

Like communism, Nazism and terrorism, the “ism” concepts and practices can do more harm than good.

Extremism is a good example of its negative, sometimes destructive, effects. So is racialism.

We must be on guard against false prophets, pretenders and campaigners with personal agendas.

They are dissenters motivated by self-interest and misguided beliefs. Their aim is to plant the seeds of doubt, suspicion and rebellion.

Fear is a commonly used weapon to create panic and opposition. It becomes a medical and social issue when it leads to phobia.

In some cases, fear triggers national disunity, family discord, social strife and violence.

Malaysia has witnessed many “anti” crusades – anti-dam construction, anti-Lynas, anti-highway building and anti-temple removal.

Sometimes, one wonders whether the resources can be channelled to more meaningful purposes like charity, community development and education advancement.

Another widely-employed strategy is rumour-mongering intended to damage integrity, harmony and unity.

Strangely, many Malaysians accept rumours as the gospel truth, not realising that the wagging tongues strive to spread fear and malice.

Years ago, Tun Abdul Razak once advised: “Don’t listen to rumours.” Not much has changed since then. Many people are still gullible, easily swayed, and outright ignorant.

The rumour mills have expanded from coffee shops, markets and taxi stands to factories, community halls and new townships.

When nothing works, objectors and opponents threaten to institute legal proceedings. The “I will sue you” mentality is quite widespread. It seems to be the final answer to one’s frustrations, grievances and selfish interests.

Bad habits die hard, Negative attitudes linger. We are not an enlightened, liberated society. Do we need to wait for another 55 years to see positive change in our mindset?

ROSELINA, Batu Caves, Selangor.


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Singapore ‘warns’ US on China bashing

Realism as S’pore ‘warns’ US

Behind The Headlines By Bunn Nagara

The city state has begun to adjust to emerging regional realities while pivoting on its pragmatic impulses, as always, while steering a steady course between China and the US.

SINGAPORE’S political positions are nothing if not coolly calculated and calibrated. They are specially so when expressed in formal statements at high-level meetings.

In Foreign Minister K. Shanmugam’s keynote address to the CSIS (Center for Strategic and International Studies) gathering in Washington recently, US media reported him as “warning” the US against China-bashing rhetoric.



Words about containing China, particularly in the populist mood of a US election year, would he said cause a “new and intended reality for the region.” It was not the first time Shanmugam had said so, having previously cautioned against the futility of containing a rising China.

However, these statements do mark a shift from previous Singapore policies on the US and China. As a small country overwhelmingly dependent on international trade, finance and therefore regional stability, an unwritten rule for Singapore has long been to avoid making waves while sidling up to the largest kid on the block.

Neither the region’s pecking order nor Singapore’s guiding principles have changed, only the emerging realities on the ground. The wherewithal for continued US pre-eminence has largely flattened out without having yet declined, while China’s stature and substance continue to rise.

The Obama administration has lately pledged to boost the US regional presence, but the extent, duration and consistency of doing so are unclear. China, meanwhile, has no need to risk overstretching itself in East Asia because it is in the region’s centre.

At one level, Singapore’s latest statement confirms a shift from former Minister Mentor Lee Kuan Yew’s pro-US slant following his retirement last May. For half a century, Lee had championed an alliance with the US over other powers like China, lately much of it because of a rising China.

At a more substantive level, Shanmugam’s statement well indicates Singapore’s new and belated efforts to woo an ascendant China. In seeming different now, Singapore is merely reaffirming its standard pragmatism based on an acute sense of self-preservation.

For the region, Singapore’s new tack may be surprising at first but not unwelcome. It simply expressed the obvious when that needed expressing, even if in doing so it made Singapore look more pro-active than its neighbours in acknowledging China’s burgeoning gravitas.

Singapore’s advice to Washington also came on the eve of Chinese vice-president (and prospective president) Xi Jinping’s state visit. The timing had apparently turned up the volume of Shanmugam’s statement to US lawmakers and their constituents.

Like everyone else, the US had long perceived Singapore as a feisty independent state averse to China’s dominance, following its early struggle against ethnic Chinese leftists and then its break-up with Malaysia, while retaining a largely ethnic Chinese population.

Today, Singapore’s “new look” policy is effectively not only for Washington’s benefit or just to showcase a contemporary Singapore to China. It also serves as an oblique reminder to Beijing that any hostile US rhetoric now would be mere campaign posturing and therefore undeserving of a like reaction.

After all, China is also getting set for a leadership change, a time when new directions may be set in ways likely to appease the populace. Its decade-long leadership is more than twice as enduring as a US presidential term and its policy direction could be several times as significant as the US equivalent.

Still, news reports implying how tiny Singapore had “warned” the world’s sole superpower might have seemed strong, if not strange. It is a measure of Singapore’s new posture that far from denying such reports, Shanmugam proceeded to expand on his comments.

He noted with approval how Chinese media widely reported his comments approvingly. Singapore media were also not shy in lingering over the issue.

The Straits Times noted that “a power transition is under way” in the region. Singapore-based Channel News Asia noted how well Shanmugam’s remarks had played in China.

Nonetheless, many US Netizens were not as hospitable to the comments. Among the more common responses was the defensive argument that US rhetoric against China was free speech and so warranted no warning or censure.

Another common reaction was to despise China and its unfolding development even more. A zero-sum mentality prevailed on US-China relations, aggravated by a pervasive sense of a declining US economy in free fall.

The third common reaction among Americans commenting online was to attack the messenger. Thus Shanmugam was criticised for acknowledging China’s success and daring to warn the US over it.

Singapore’s revised articulation of regional realities does not surprise any serious onlooker in Asia. Its concerns are self-evident, its priorities apparent, and its assessment of the region timely.

A contrast comes with the Philippines, where rival claims with China over offshore territory has come to define their relationship. This amounts to allowing marginal interests to determine larger substantive ones: yet again, pragmatism distinguishes Singapore’s policies from the Philippines’.

Even so, Singapore’s recent assessment of regional realities sums up Asean’s understanding of them. What Washington will make of it, if anything, is anybody’s guess.

Republicans are particularly anxious to parade their conservative values, such as by defending US prerogatives, paramountcy and exceptionalism. This has encouraged emotive responses from Americans “in America’s interest.”

Democrats can only respond defensively by trying to match or pre-empt the Republicans’ US-centric aggressiveness. However much the Obama White House may prefer a more mature and measured response, it must also know that is far less likely to “sell”.

Thus Shanmugam’s counsel to Washington comes full circle. He spoke as he did because of the circumstances of the time, and it is those circumstances that now make him an easy target in the US.

As Americans brace for a presidential election in November, all parties can be just as prickly over any foreign reminders that the US needs to behave better. And it is practically a given that enraged US Netizens disconnected from reality will be given a better hearing in Washington than even the most thoughtful of allies in Asia.

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