HBOS and Lloyds TSB hit by bad debt

Lloyds TSB saw bad debt cases rise by a fifth to £800 million while HBOS experienced an increase in bad debt by 15 per cent to £864 million.

“The rate of growth in the number of customers filing for bankruptcy and IVAs (Individual Voluntary Arrangements) does… remain a key factor in the outlook for retail impairment,” warned Lloyds TSB.

Despite both banks making a profit, Britain’s spiralling debt levels – which now top £1.2 trillion – are starting to reach the bigger banks which until now had generally managed to weather them.

Yet with many banks experiencing sluggish growth, it is prompting them to become more responsible lenders.

For instance, Lloyds TSB added that it expected “greater stability” in impairment charges in the second half of the year now that it has restricted who can get loans.

HBOS said it expects those in debt to become more aware “of the need to self-provide for their futures”, though for many faced with bankruptcy this may be too late.