Lloyds in new £387m writedown

Lloyds TSB asserted that its capital position was strong enough to support its growth plans as it announced £387m of further writedowns from the credit crunch.

Britain's biggest unsecured lender failed to follow its rivals Royal Bank of Scotland and HBOS, which are planning to raise £16bn of equity between them to bolster their capital positions. RBS and HBOS are also paying this year's interim dividend in shares rather than cash.

Asked about the bank's capital buffer and whether the bank could need a rights issue, Tim Tookey, acting finance director, said: "Overall, we are comfortable that our capital position is relatively robust... We have sufficient capital to deal with current plans for organic growth."

Mr Tookey declined to comment on the prospects for this year's dividend, but he said the board took each payout decision as it arose. "We have a history of looking after our shareholders over time," he added. Lloyds only started raising the dividend again last year after freezing it for five years.

Lloyds' writedown on credit-related investments in the first quarter was a relatively small increase on the £280m charge it took last year. The bank also took a £740m charge through its reserves for the reduced value of assets.

Analysts said that Lloyds' business performance looked good, but that investors were suspicious of the varying levels of write-downs from banks. Though Lloyds appears to have a more conservative asset portfolio than its rivals, it may not have been under such pressure to reveal the worst because it was not announcing a rights issue, they said.

Excluding the impact of market turbulence, each of its three businesses increased pre-tax profit by at least 10 per cent in the first quarter. The bank said tough conditions in financial markets were benefiting it as it took market share in mortgages and savings from less healthy rivals. Mr Tookey said Lloyds was not expecting a recession in the UK this year, but that there would be a marked slowdown as business and consumer confidence falls. Growth should start to pick up next year, he added.

Mr Tookey said Lloyds was on the lookout for acquisitions.

Lloyds' shares fell 3 per cent to 439p.