LLOYDS Banking Group today said it is still expecting to suffer more losses this year.
The company, formed from Lloyds TSB's rescue of Edinburgh-based HBOS last year, said it has suffered a "significant" rise in impairments in the first three months of this year as the economy continues to worsen.
It said it expects corporate defaul
ts to rise by more than 50 per cent in the current year, particularly in commercial real estate portfolios.
The firm added that the portfolio of properties once owned by HBOS is "more sensitive" to a downturn in the economic environment.
However, it did say that it had enjoyed "a good revenue performance" in the early part of this year and had made progress in stripping out costs.
Lloyds chief executive Eric Daniels said: "In extremely challenging market and economic conditions, the group has made good progress in its first few months.
"We have delivered a smooth transition to the newly enlarged Lloyds Banking Group and have a clear focus on developing the group's core businesses.
Lloyds also admitted that its life assurance and pensions business, which includes Edinburgh-based Scottish Widows, has suffered a slump, with new business sales plunging by 22 per cent in the first quarter.
It said that the decline reflects the "general market-wide slowdown in the sale of life, pensions and investment products".
Lloyds said that it has already achieved more than £150 million of cost synergies from the integration of Lloyds and HBOS and is committed to its target of brining about more than £1.5 billion a year of cost synergies by the end of 2011.
That is expected to include significant job cuts and the company is planning a major review of the portfolio of Lloyds TSB and Bank of Scotland branches.
It has already announced that the Lloyds TSB brand will gradually be phased out in Scotland, with Bank of Scotland becoming the group's retail brand.
Mr Daniels said that the participation in the Government's asset protection scheme will "substantially reduce" the risk profile of the group's balance sheet and strengthen its capital position.
"Whilst we continue to expect difficult economic conditions to prevail over the next year or so, we believe the strengthened group will be able to comfortably manage through the expected near-term economic downturn."
Meanwhile, Barclays said today that pre-tax profits had increased by 15 per cent in the first three months, to £1.37bn.
The increase was largely down to a strong performance by Barclays Capital, its investment banking division.
However, bad debts showed a large increase, rising by 79 per cent to £2.3bn.
