Lloyds: 90% of BoSI development loan book impaired

BoyRacer · **Joined:** Jul 26, 2009 **Posts:** 10066

Lloyds: 90% of BoSI development loan book impaired - Ian Guider -> http://www.tribune.ie/business/news/art ... -impaired/

Quote:

BANK of Scotland Ireland (BoSI) has revealed 90% of its property development loan book is impaired.

The bank, owned by the UK's Lloyds Banking Group, also said there was no activity in the property market here and it was being prudent by taking severe provisions against its loans to developers.

BoSI loaned €13.3bn for development and investment property in Ireland. Some 46% of this loan book, or €6bn, was for property development and 90% of these loans were impaired, Lloyds said in a presentation to analysts in London last week. The remainder of the loan book was for property investment, of which 45% was impaired, the bank said.

there is more

needle · **Joined:** Jan 18, 2009 **Posts:** 2550 **Location:** NWUK

So its 90% of the 6Bn, not the 13.6Bn, right?

Either way; Holy. Fuck.

yoganmahew · **Posted:** Sun Aug 08, 2010 8:53 pm

needle wrote:

So its 90% of the 6Bn, not the 13.6Bn, right?

Either way; Holy. Fuck.

Right, only 45% of the other 7.6 bn is impaired...

2Pack · **Joined:** May 3, 2007 **Posts:** 10508

Impaired is not the same as non performing, they may have been group criticised eg for going under desired ( not contractual ) collateral floors but are nevertheless performing. Impaired may simply mean that some risk johnny in a back street in Camden does not like the look of them

BoS could have some grand plan to 'write them back on' to full performance to ride a 'recovery' plan chaps.

cjs · **Joined:** Dec 5, 2007 **Posts:** 240

yoganmahew wrote:

needle wrote:

So its 90% of the 6Bn, not the 13.6Bn, right?

Either way; Holy. Fuck.

Right, only 45% of the other 7.6 bn is impaired...

so two thirds of the book in impaired

yoganmahew · **Posted:** Sun Aug 08, 2010 9:41 pm

2Pack wrote:

Impaired is not the same as non performing, they may have been group criticised eg for going under desired ( not contractual ) collateral floors but are nevertheless performing. Impaired may simply mean that some risk johnny in a back street in Camden does not like the look of them

BoS could have some grand plan to 'write them back on' to full performance to ride a 'recovery' plan chaps.

I don't believe this is the case; the UK banks seem to use a schema of:
Good
Satisfactory
Lower
Below standard, but not impaired
Past due, but not impaired
Impaired

The last three, I believe, constitute 'criticised' in the Irish context. From the Lloyd's 2009 Results:
"Impaired loans are loans where the Group does not expect to collect all the contractual cash fl ows or to collect
them when they are contractually due."
http://www.lloydsbankinggroup.com/media ... BG_R&A.pdf
(Big pdf).

2Pack · **Joined:** May 3, 2007 **Posts:** 10508

I think much of the applicable schema originates from the EU Commission framework for allowing toxic bank workouts EU wide.

http://ec.europa.eu/competition/state_a ... assets.pdf

This allows economic analysis in addition to normal accounting treatments which is why I referred to some risk johnny somewhere in the valuation mix.

Duisigh · **Joined:** May 28, 2008 **Posts:** 2675

what was did the risk committee look like, the cast of Punch and Judy ?

spqr64 · **Posted:** Mon Aug 09, 2010 9:03 am

Duisigh wrote:

what was did the risk committee look like, the cast of Punch and Judy ?

Naw it was probably more the cast of "Have you hit your loan target for the month to get your annual bonus?"

yoganmahew · **Posted:** Mon Aug 09, 2010 9:06 am

spqr64 wrote:

Duisigh wrote:

what was did the risk committee look like, the cast of Punch and Judy ?

Naw it was probably more the cast of "Have you hit your loan target for the month to get your annual bonus?"

Ah, "'Allo, 'Allo" then...

Honest Barrister · **Posted:** Mon Aug 09, 2010 9:46 am

I've heard that several "risk committee" and "commercial lending" type have been placed on gardening leave for the last few months, while BoSI tries to work out how they screwed up so badly & why it happened.

Strategic landbanks outside Sligo (etc.), anyone?

BrendanG · **Posted:** Sat Dec 18, 2010 6:49 am

Quote:

£7.6bn hangover at Lloyds after Irish losses rocket
http://www.independent.ie/business/euro ... 65596.html
By Laura Noonan
Saturday December 18 2010

LLOYDS Banking Group is nursing a £7.6bn (€9bn) hangover from its Bank of Scotland (Ireland) adventure after losses at the Irish division rocketed in recent months.

The massive losses at Lloyds emerged yesterday just hours after National Irish Bank (NIB) boss Andrew Healy told analysts there was "no guarantee" impairment charges would fall in 2011.

"The property market in Ireland remains in very poor shape," Mr Healy said on a conference call, adding that the austerity measures recently announced "will not help" the situation.

Lloyds's statement also honed in on the austerity measures, claiming they were "negatively affecting" market sentiment because of fears the cuts could blunt economic growth.

"We are concerned that any economic recovery in the Republic of Ireland may take longer to achieve, and that asset prices will remain depressed for longer than previously anticipated," Lloyds said.

That prediction prompted Lloyds to increase its Irish loan loss provisions from £1.557bn at the half-year point to £4.3bn.

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JohnnyTheFox · **Joined:** Oct 20, 2010 **Posts:** 1267

I heard some chatter recently suggesting that the high rates of loan impairment at BoSI are a self-fulfilling prophecy. An example given was of a borrower who owed 5m on a commercial property loan and has been keeping payments up to date. He has also signed a personal guarantee and has real assets that the bank could chase if it wanted to. Instead he got a valuation of the building at 2.5m and got Bank of Ireland to agree to refinance at 2.2m. He then went to BoSI/Lloyds and offered them 2.2m as full and final settlement and they accepted it without arguing. Apparently the people at Lloyds just want to get the Irish business wrapped up and off their plate at any cost even if that means a >50% write down on a performing loan.

the edge · **Joined:** Sep 25, 2007 **Posts:** 3720

BOSI had what I think is politely described as an 'entrepreneurial' culture.

Incidentally, I've been told they paid bonuses this year, some quite generous. Redundancy deals on offer are also seemingly pretty generous.

No reward for failure: except for bank(st)ers.

Chopper Dave · **Joined:** Dec 20, 2008 **Posts:** 44

JohnnyTheFox wrote:

I heard some chatter recently suggesting that the high rates of loan impairment at BoSI are a self-fulfilling prophecy.

I have to say I'm not surprised to hear this - I though the manner of BOSI's exit was completely self-defeating if they are hoping to recover value in from their loans. If your bank has publically stated that it views its market as a complete basketcase and that it doesn't intend being around in the future, then I think it's only natural that borrowers will start to look for ways out of their loan; even if they have the means to keep paying.

Lloyds: 90% of BoSI development loan book impaired

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