Feb 27th 2021ON FEBRUARY 24th Lloyds reported its results for 2020, completing the set of big high-street lenders. As with Barclays, HSBC and NatWes
ON FEBRUARY 24th Lloyds reported its results for 2020, completing the set of big high-street lenders. As with Barclays, HSBC and NatWest, Lloyds’ profits dropped sharply last year, but its hopes for this year are higher. That is partly because it reckons losses on loans will be smaller than it had been expecting. All the big banks have cut their provisions for losses arising from bad loans in the coming year. Lloyds took an impairment charge (a reduction in the value of its loan book to account for the chance of defaults) of £4.2bn ($5.9bn) in 2020 compared with £1.3bn in 2019. It expects the charge to drop back to pre-pandemic levels this year.
Although GDP dropped by a tenth last year, the number of firms going bust was down by a fifth. The fall in bankruptcies in Britain has been one of the largest in a big economy. That is why the IMF has warned of “pent up” insolvencies. Yet the banks do not see a wave of bankruptcies heading towards them. That is because of the way the government has designed its corporate-loans programme.
In March last year, soon after the first national lockdown began, Rishi Sunak, the chancellor, pledged to support up to £330bn-worth (around 15% of GDP) of loans to firms hit by the pandemic. The loans were to be made by the banks; the government would guarantee 80% of them. But even though they were on the hook only for a fifth of any…