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HBOS takes Ł5.2 bln stg hit on bad debts, writedowns

Britain's biggest home lender HBOS Plc took a Ł5.2 billion ($8.5 billion) hit on the value of its risky assets and bad loans on Monday for the first nine months of this year, up Ł2.7 billion in the third quarter.

HBOS said its takeover by UK rival Lloyds TSB remained on track and it expects the deal to complete in January.

HBOS said its losses from “market dislocation” stood at Ł1.83 billion at the end of September, up from Ł1.1 billion at the end of June.

Bad debt losses in its retail banking unit rose to Ł440 million for secured loans and Ł806 million for unsecured loans for the nine months.

Impairments at its corporate banking arm jumped to Ł.72 billion by the end of September, up from Ł469 million at the end of June. The unit also took a Ł389 million hit on losses from joint ventures and losses on investment securities.

The bank said it continues to operate in difficult market conditions, but the sale of Ł3 billion of preference shares to the UK government and Ł8.5 billion of shares - guaranteed by the state - would boost its funding position following deposit outflows in September and the first half of October.

The outflows “have now slowed significantly,” it said.

Lloyds on Monday published its circular for shareholders for its takeover of HBOS. Lloyds stepped in to buy HBOS in a government-brokered deal after HBOS was hit by a deepening global financial crisis and concerns about its exposure to the weakening UK housing market.

Both banks were forced to recapitalize under the government's rescue plan. (Reuters)