Lloyds, RBS Bad-Loan Surge Is Said to Be Driven by CarillionBy
Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc’s suffered an escalation in bad loans in the third quarter because of their exposure to struggling U.K. construction company Carillion Plc, according to a person with knowledge of the matter.
Bad loans at Lloyds rose by almost a third to 270 million pounds ($360 million) in the three months through September from a year earlier, because of a “single large corporate impairment,” Chief Financial Officer George Culmer said in October, without identifying the company. At RBS, the commercial banking division’s net impairment of 151 million pounds was driven by a “single name,” Chief Executive Officer Ross McEwan said.
The person isn’t authorized to speak to the press and asked not to be identified. Representatives of RBS and Lloyds declined to comment.
Carillion is in a race against time to sell assets and shore up its balance sheet as losses and writedowns pile up. It issued a fresh trading alert in November, the third in six months, after saying it’s in danger of breaching debt covenants at the end of this year.
Carillion creditors have hired financial advisers and lawyers in anticipation of the U.K. builder seeking to restructure its 961 million pound debt. Banks that participated in an 835 million-pound credit line are working with FTI Consulting Inc. and Clifford Chance LLP, Bloomberg reported last month.