Lloyds makes first profit since U.K. tax payer bail out

Lloyds Banking Group (LLOY) has just announced its first annual profit, since the government rescue. In 2008 at the height of the financial crisis, the Labour government brokered a deal whereby the U.K. tax payer injected capital in return for a 41% stake in an enlarged group which included HBOS (Halifax Bank of Scotland).

For 2010 it made pre-tax profits of £2.2bn, compared with a £6.3bn loss in 2009 and higher than consensus estimates of £2 billion. Bad debt was down to £13bn, from £23bn the previous year.

Things seem to be improving faster at Lloyds than RBS and with its signficant share of the U.K. mortage market as a result of the HBOS integration the future is probably bright unless the housing market is dented by interest rate increases later in the year. It is worth remembering that Lloyds and HBOS would never have been able to combine because of competition issues in normal circumstances.