Lloyds Banking Group revealed a half-year £4bn loss after writing down the value of assets that are now worth less than previously thought. Britain's biggest retail bank admitted that 80% of the soaring bad debts were caused by HBOS, acquired controversially by a rescued deal last January at the height of the banking crisis.

Nonetheless, shares in the bank rose 6% to 89p after the bank reassured the market that it believed its so-called impairment charge had now peaked and that it expected the economy to stabilise with a "weak upturn in 2010". But the shares are still trading below the 122p at which the taxpayer breaks even on its stake in the bank.

Commenting on the worse-than-expected bad debts, Lloyds Group chief executive, Eric Daniels, said: "Our first-half loss was driven by the high levels of impairment. The core business delivered a resilient performance, despite the weak economy. We are successfully managing the short-term issues and are well positioned to outperform over the medium term, providing value to our customers and shareholders. Overall impairments in the second half of 2009 are expected to be significantly lower than the first half with progressive reductions thereafter."