Lloyds TSB hit for £70m

Lloyds TSB has had to set aside £70 million, equivalent to £4.35 for every one of its 16 million customers, because of loans it extended to two collapsed US corporations.

Chief executive Peter Ellwood said he could not name them but as he admitted they came from the telecoms and energy sectors and had both been accused of "financial impropriety" it appeared clear the loans were to Enron and WorldCom. Describing the bad debts as "one-offs" he said he hoped the bank had no further exposure to such types of dodgy debts.

But adding further to the money set aside to cover poor loans in Argentina meant Lloyds profits stood still at £1.6 billion in the first half of this year. The City had expected some modest growth and was spooked by Ellwood's comments that the trading environment was likely to remain difficult in the second half of the year.

He said: "High profile corporate failures resulting from irregularities in accounting treatment in the United States have increased the destabilisation of global equity and bond markets which has a direct effect on our results."

Lloyds said it had increased its provisions against Argentina loans from £100 million to £150 million. The bank's shares fell 13p to 573p as the stock market stabilised after yesterday's 201-point drubbing. In the first half-hour of trading, the FTSE-100 edged up 10 points to 4054.4, seemingly shrugging off the latest development in the scandals sweeping corporate America. Scott Sullivan and David Myers, executives at the collapsed WorldCom telecoms giant, were arrested in Manhattan last night, six weeks after WorldCom admitted misleading investors and began a quick descent into bankruptcy.

Sullivan, the former chief financial officer, is alleged to have played a leading role in manipulating World-Com's books. Myers was his secondin-command.

? The scale of the crisis facing Britain's company pension funds was confirmed today by evidence of a growing black hole in schemes run by major firms.

Less than a half of schemes run by FTSE-100 companies have invested enough money to meet their expected future liabilities, according to an independent survey.

The research shows 33 out of the 62 companies (53%) in the survey have underfunded schemes. Hewitt, Bacon &Woodrow, which conducted the research, said the shortfall was caused by a change to more rigorous accounting treatment of pension funds and lower returns on investments.