Lloyds point the finger at HBOS for £4bn loss

This morning, Lloyds Banking Group, 43% owned by the taxpayer, reported an underlying loss of £4bn in the first half of the year. Nick Raynor, investment adviser at The Share Centre, comments on today's results and what they mean for investors.

"Lloyds Banking Group has blamed its losses on bad debts accrued by HBOS, which it controversially rescued last year. Lloyds took charge of £13.4bn, mainly for bad loans, 80 per cent of which came from HBOS.

"In fact, HBOS' reckless lending cancelled out the £6bn pre-tax profit Lloyds Banking Group made in the first part of the year. Although the HBOS takeover may present Lloyds with a significant opportunity to cement its future place on the high street, HBOS' skeletons in the closet continue to haunt the Group.

"The good news for Lloyds Banking Group shareholders is that most of these poor quality loans are now insured by the government, therefore by us the taxpayers. This means any future losses will be a problem for us not the banks.

"Despite the bank's losses its share price jumped 7 per cent in early morning trading. However, investors hoping to profit from day trading in the banks should be wary as we foresee further bad debts and rights issues within the sector. As Lloyds now has the biggest exposure to UK consumer debt we are listing the bank as a tentative weak hold."