Lloyds Bank, England’s premier commercial bank, has rolled out £2.4 billion provision fund for the second half of the year to tackle possible economic fallout due to Covid-19. It is reported that the bank’s emergency fund will be used to cover potential bad loans.
António Horta-Osório, chief executive, who is stepping down next year after more than decade’s term of leadership, told the media, “The pandemic had had a “profound” impact on the global economy, as Lloyds became the latest in a string of banks to report weaker-than-expected results this week.”
The share price of the bank plunged by 7 percent marking its lowest level in eight years. The bank has reported a pre-tax loss worth £676 million in the first half of the year, compared to a pre-tax profit of £1.3 billion in 2019.
It is reported the bank provided loans worth more than £9 billion to various companies through varied government-backed relief schemes and approved more than 1.1 million payment holidays to consumers affected by Covid-19 pandemic.
According to Lloyds Bank, England‘s GDP is anticipated to tumble 17.2 percent over the next year.
The economic lockdown has led to a steep fall in demand and supply which have hit large banking units in Europe. Majority of the banks are likely to sustain losses due to bad loans in the region. Furthermore, Spain’s BBVA also announced emergency funds.
If the recovery is prolonged, then problems in the real economy are likely to spill over to the banking system.