Chancellor of the Exchequer Alistair Darling said the U.K. is considering ways to support to Lloyds Banking Group Plc, whose share price dropped 32 percent yesterday, Bloomberg reported.
"There are a range of options open to us," Darling said on the BBC's Newsnight program when asked whether he would pledge government funds to Lloyds. "We've got to work with banks to ensure that bad debts are identified and revealed. If we don't get these bad assets out of the system, banks will not lend."
Lloyds fell after saying it expects HBOS Plc, the U.K. lender it took over last month, to report a pretax loss of about 10 billion pounds ($14.5 billion). The U.K. government owns 43 percent of the company after overseeing a bailout last year that brought the two lenders together.
HBOS posted about 7 billion pounds of losses on loans to companies in 2008 as Lloyds applied "more conservative" accounting rules, the bank said yesterday. The loan impairments are more than double HBOS's own forecast in December.
Lloyds Chief Executive Officer Eric Daniels said this week the bank would have done "three to five times" more due diligence on the government-brokered takeover had it not been for time pressures. Lloyds agreed to buy HBOS as the U.K.'s biggest mortgage lender came close to collapse when credit markets froze after Lehman Brothers Holdings Inc.'s bankruptcy.
Lloyds shares tumbled 29.5 pence to 61.4 pence in London yesterday, paring the bank's market value to about 10 billion pounds.
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