Lloyds black horse is unlikely to find form any time soon

By Alistair Osborne, Business Editor Published: 9:05PM GMT twenty-six February 2010

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Lloyds Banking Group

That once neat racer from Lloyds will be a no-show for the second year running, saddled as it is with �24bn of bad debt charges and �6.3bn of waste . You"d think the tutor one Eric Daniels competence be abashed about handicapping the equine in this way. Not a bit of it. They"re an confident breed, trainers. But couple of are as apt as Daniels in articulate up a nag.

For those who haven"t been following the black horse"s fitness bulletins, the savage hasn"t been the same given Daniels and his afterwards partner, former authority Sir Victor Blank motionless to partner it with that bucking wild equine HBOS.

Analysis: Losing income was the bankers" aim all along HBOS haunts Lloyds as bad debts strike �24bn Eric Daniels starting to see similar to a Cheltenham punter forgetful of a 100-1 shot Barbers Shop misses Cheltenham Festival prep competition since of complicated belligerent Royal Ascot 2009: Even Ascots untouchables are changed by Yeats ancestral delight Vincent OBrien, racing legend, dies

The upshot is that, whilst Daniels someway clung on, the former owners lost carry out of their horse. The Government took the whip palm around a right away 41pc stake. And afterwards the hat got upheld turn for �22.5bn of uninformed capital.

It"s in this context that you have to put Daniels" comments on Friday when he insisted the corporate animal was not usually entrance behind to form but would arise all the stronger for the confront with HBOS.

All the fitness metrics, he claimed, were relocating in the right direction: revenues were set to climb over the entrance years by high singular digits; bad debt charges had peaked, with the 21pc tumble in impairments in the second half of last year approaching to be mirrored in 2010; and costs were falling, helped by the synergies from that mating with HBOS, right away up from �1.5bn to �2bn.

All this might well be true. But Lloyds still has the air of an organization in denial. Nothing proves that improved than the position on senior manager bonuses. Sure, Daniels waived his. But why, you wonder, was he in line for his full desert of �2.25m any way after such thumping losses.

Daniels might well be operative each waking hour only mucking out the stables. And, yes, he did a satisfactory pursuit keeping the black equine out of the Asset Protection System, that would have done the taxpayer the infancy owner. It"s additionally loyal that Barclays and HSBC that didn"t take the Government shilling had to daub their own shareholders for additional cash. And, that we"ve only been by the misfortune downturn for 50 years.

Daniels can have all those caveats. But half of his reward is associated to the bank"s profits. It"s a rum state of affairs when a arch senior manager can be entitled to some-more than �1m in bonuses for presiding over whacking good waste wholly caused by a understanding he did. The reason, apparently, is that reduction �6.3bn is less than the disastrous aim set by the arrangement cabinet (chaired by Wolfgang Berndt). The remco should be abashed of itself.

It"s an accounting refinement as well that the "statutory distinction prior to tax" (ho hum) is increased by an �11.2bn "acquisition associated disastrous organization to help the poor credit" since Lloyds paid less than half HBOS" �18bn book value. It doesn"t shift the actuality that Daniels and Blank paid far as well most for HBOS when the credit predicament was already using at a shave and when only one see at the beast"s wild eyes should have set the warning bells ringing.

Daniels" certainty that HBOS will in the future infer a extraction understanding with the synergies alone capitalised at a regressive �12bn additionally takes a lot on trust. The double-dip retrogression a little economists fright would fast retreat the black horse"s mending fitness formed as the precision system of administration is on GDP expansion this year and subsequent of 1.8pc and prosaic skill prices.

Daniels got his paws on HBOS only over a year ago. Give him three, he reckons, prior to he can be judged on either his understanding is a racer or donkey. By then, he reckons, the black equine will be behind at the races. The contingency on a jubilant return, though, still see flattering long.

alistair.osborne@telegraph.co.uk