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Lloyds dislocated

• Robert Peston
• 30 Jul 08, 08:00 AM

was supposed to be the British bank relatively immune to the credit-crunch losses afflicting most of the world's big banks.

So a fall of 70% or almost 拢1.4bn in its pre tax profits for the first half of the year is something of a shock.

It blames what it calls market dislocation, or highly volatile conditions in the world's financial markets, and implies that its shareholders should ignore these problems - and concentrate on the progress of the group elsewhere.

Certainly the rest of its banking business looks in pretty good shape.

Its share of new lending in a depressed British mortgage market has soared to more than 24%, and it has made these new homeloans "at significantly increased new business margins and at an average new loan-to-value ratio of 63%".

Or to put it another way, the ill wind of the general mortgage drought means much fatter mortgage profits for the small number of bigger banks that still have the ability to lend.

So, in general, Lloyds TSB's basic banking operations look robust.

But that so-called market dislocation - a phrase it mentioned so many times in its statement that I lost count - has generated losses of almost 拢600m.

And what Lloyds calls "adverse volatility" in its substantial insurance operation has generated a further half a billion pounds of charges.

Lloyds is putting a brave face on it all by increasing its dividend by a modest 2%.

However the 70% fall in statutory profits is real - for all that Lloyds would prefer that we focus on what it calls "underlying" profit - and is a worrying possible augury of horrors that may in the coming days be disclosed at our other banks, as they too disclose their results.

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