Lloyds in warning over Irish crisis

One of Britain’s biggest banks has issued a warning over the impact that Ireland’s debt crisis will have on its performance this year.

Part-nationalised Lloyds Banking Group announced it will have to write off more of its £26.7 billion portfolio of loans in the country due to the deteriorating economic situation there.

It now expects bad debt losses of £4.3 billion this year, compared with the £1.6 billion reported in June.

Lloyds shares fell 5%, accelerating losses seen across the banking sector earlier in Friday’s session after Moody’s cut the country’s credit rating.

Fears over eurozone contagion were amplified by a report from the Bank of England, which warned Britain’s banks were not entirely safe from the continental debt crisis.

Lloyds said: “We are concerned that any economic recovery in Ireland may take longer to achieve, and that asset prices will remain depressed for longer, than previously anticipated.”