Part-nationalised lender Lloyds Banking Group, which took over HBOS at the peak of last year's banking crisis, has said it made a £4billion half-year loss on account of HBOS's reckless lending policies.

The bank, which is 43% owned by the Government, said impairments on bad debt rose "significantly" to £13.4billion, largely due to HBOS.

Lloyds said HBOS's assets accounted for 80% of the impairments.

The group said most of the troubled HBOS loans were "outside the traditional Lloyds low-risk appetite".

The bank said the fall in property prices over the first six months of the year had a significant effect on the group's results because of the large amount of related loans at HBOS.

It said more conservative assessments of HBOS's commercial property assets meant impairments, which were up from £2.5billion in 2008, should peak in the first half of the year.

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."

Mr Daniels said the bank expects the economy to stabilise in the second half of this year and gradually start recovering in 2010.