Update: Lloyds warns it will make a loss in 2009

Lloyds Banking Group has warned investors it is expecting to make another loss next year having unveiled massive losses at subsidiary HBOS for 2008.

Group finance director Tim Tookey, delivering his outlook for the enlarged group, said he expected Lloyds to make a further loss before tax in the next year, even before any further goodwill losses.

He said: 'Whilst our risk management and business support culture is strong, the continuing economic deterioration in the UK will make 2009 another difficult year.

'Overall, before the recognition of negative goodwill, we expect the enlarged Group to report a loss for 2009.'

He explained the main cause of the loss would be as a result of higher unemployment, falling house prices and corporate impairments, which could be as high as 2008's.

'We currently expect retail impairment levels to rise significantly in 2009, largely reflecting the expected increase in unemployment levels in the UK and the impact of further house price falls. Corporate impairment levels are expected to remain at the high levels seen during 2008, whilst Treasury asset and investment portfolio write-downs are expected to be significantly lower,' he said.

Earlier this morning the group confirmed the scale of losses in both Lloyds TSB and HBOS from which the new banking giant was formed, while admitting it had not yet reached a deal with the government to insure toxic assets.

Profits at the former Lloyds TSB dived by 80% in 2008 amid rising losses across its businesses.

Meanwhile HBOS itself, which was merged into the company after it fell victim to the credit crisis, lost £10.8 billion in total, in-line with its warning delivered at the start of the month.

The group also said it was still in talks with the Treasury regarding the Asset Protection Scheme, with an update due soon on what level of assets it would be putting into the scheme. The bank is expected to insure £250 billion of its assets under the scheme.