Lloyds Banking Group warned that income was probably to be lower in 2012 than it was in 2011 and confirmed it would miss key medium-term financial targets. However, it also predicted that impairments -- losses taken on bad loans -- would ease faster than predicted this year, while cost savings were also set to accelerate. According to Financial Times, Lloyds made a pre-tax loss of £3.54bn in 2011 as a result of the sharp fall in loan impairment losses was unable to compensate for a previously announced £3.2bn charge arising from the payment protection insurance mis-selling scandal. Mr António Horta-Osório, chief executive, said that UK faced a “long and difficult" recovery, as unemployment is set to increase and interest rates would remain low for a prolonged period. “I don't think I'm being gloomy, I'm being realistic," he said, adding that he felt fully recovered and was now “sleeping like a baby", Financial Times reported. Mr Horta-Osório pointed to the progress Lloyds had made in shrinking its balance sheet – it removed £53bn of unwanted assets last year to take its non-core portfolio down to £141bn. It said it was on track to achieve its 2014 goal of decreasing the portfolio to less than £90bn. “The balance sheet is the most important thing at this stage," said Mr Horta-Osório. Net interest margin fell from 2.21 per cent to 2.07 per cent and is expected by Lloyds to dip below 2 per cent in 2012. Its core tier one capital ratio, the key measure of balance sheet strength, rose from 10.2 per cent to 10.8 per cent at the end of 2011. Lloyds also identified an extra £200m of cost savings for 2014, which would not increase predicted job losses of 15,000. Its overall performance was helped by a 26 per cent fall in loan impairment charges to £9.8bn. Ireland accounted for a third of this even though the charge there fell by 25 per cent. In total, 84 per cent of Irish commercial loans are now impaired. It said the downbeat prediction that combined businesses income in 2012 would be lower than the £21.12bn posted in 2011 reflected a continued reduction in non-core assets, weak demand for loans, higher wholesale funding costs and low interest rates, Financial Times reported. Amwal Al Ghad
