why ozl has a problem

HBOS, Royal Bank of Scotland - unwilling to roll over OZ loans, or any non-UK corporate loan for that matter. Here's why:

Lloyds Banking Group reveals $22bn HBOS black hole
Ragnhild Kjetland | February 14, 2009

LLOYDS Banking Group, 43 per cent-owned by the UK Government, said its short-term outlook was challenging as it unveiled that HBOS was expected to post a 10 billion pounds ($22 billion) pre-tax loss in 2008, driven by massive impairments in corporate lending and on credit investments.

The group's stock dropped sharply on the news, hitting a low of 54.9 pence a share. Just before the market closed, it was down 33p, or 36 per cent, at 58p, still by far the biggest decline on the FTSE 100.

"HBOS is a shocker," one trader said.

Lloyds completed the acquisition of HBOS in January.

NCB Stockbrokers analyst Irfan Younus, who had expected the combined group's pre-tax profit to be £1.7 billion, said the figures were "far worse than expected" and that it calls into question whether the bank's capital position is strong enough.

UK bank shares fell sharply on the statement, although recovered some ground after the initial shock. Royal Bank of Scotland Group was down 9 per cent at 21.8p, having recovered from 19.8p.

RBS has warned it will make a loss of between £7 billion and £8 billion, excluding an impairment on its ABN Amro acquisition of between £15 billion and £20 billion.