Lloyds International blames poor commercial property loans for $1.2 billion loss

Llloyds International, the Australian arm of British giant Lloyds Banking Group, has posted a $1.2 billion loss for 2011.

Poorly performing commercial property loans were mostly responsible, according to documents lodged with the Australian Securities and Investments Commission published by The Australian.

Lloyds made an operating profit of $403 million in 2011 but wrote off $1.6 billion in commercial property loans.

In 2010 the bank made a $1.6 billion loss after it wrote off $2.3 billion in loans.

Lloyds, which has some 200,000 Australian customers, had $12.6 billion of loans and advances outstanding at the end of 2011, which was down from the $19 billion in the previous year.

The bank's net property exposure contracted 66% over the year to $2.6 billion, helped by a $1.6 billion sale of impaired loans in troubled Gold Coast and New Zealand property markets.

Lloyds' financial statements advised its portfolio had been exposed to Australian non-metropolitan real estate markets, "where market conditions and asset valuations in 2011 have continued to remain weak".

Despite the ongoing losses, chief executive David Smith told The Australian the business had a good future in Australia.

"We are on top of our balance sheet now as a result of dramatically reducing our exposure to commercial property loans," Smith says.

Its parent company Lloyds Banking Group posted a recent £2.8 billion ($4.1 billion) loss for 2011, compared with a £320 million loss a year earlier.

In 2009 the British government bailed out the banking group and still owns some 41%.