Shares in Lloyds TSB, Britain's fifth largest bank, fell by 2.15 per cent today after it revealed £1.1 billion worth of writedowns in the first quarter but insisted that its balance sheet was robust and it would not seek extra funding through a rights issue.

The bank wrote off the largest amount, totalling £740 million, on £15.3 billion worth of "available for sale" assets which includes £3.1 billion in student loan securities backed by the US Government.

Since March, banks have been withdrawing from the $85 billion (£43.1 billion) a year US student loans market, fuelled by fears that they are unable to package up the debt and raise money by selling it one because of stagnation in the global financial markets.

The bank also revealed in a trading statement that it took an additional £387 million hit on "market dislocation" in wholesale and international banking. Its largest writedown, totalling £278 million, was derived from its short term trading portfolio which includes assets linked to US sub-prime mortgages and complex securities, known as collateralised debt obligations (CDOs), backed by risky American home loans.

The remaining writedowns came from the falling value of its structured investment vehicle (SIV) assets as well as monoline insurance, which it wrote down by £58 million. Shares in Lloyds TSB fell 9.75p to 442.7p in early trading.

However, compared to its larger UK rivals, Lloyds TSB has escaped relatively unscathed from the current credit crunch. Most recently, Royal Bank of Scotland revealed that it would attempt to raise £12 billion through a rights issue after writing off a further £5.9 billion, adding to the £2.4 billion asset reduction it announced in February.

Lloyds TSB's Tier 1 capital, which is the number regulators look for to determine a bank's financial strength, is 7.4 per cent compared with RBS' 6.4 per cent — the lowest of any UK bank.

Tim Tookey, the stand-in finance director at Lloyds TSB, said today that there was no need for the lender to raise money through a rights issue, stating: "We have sufficient capital to deal with our plans for organic growth."

Mr Tookey has taken over the role until a replacement is found for the previous incumbent, Helen Weir, who has been appointed as head of Lloyds TSB's UK retail banking division to replace Terri Dial, who is moving to Citigroup.

Eric Daniels, the group chief executive of Lloyds TSB, said: "Despite the more challenging market conditions, the group remains firmly on track to deliver a good performance for the first half of 2008, excluding the impact of market dislocation and insurance related volatility."

He added: "Our strong liquidity and funding capability have ensured that the group has continued to raise wholesale funding at market leading rates.

"This gives the group a competitive advantage and has enabled our corporate and retail relationship banking businesses to achieve strong levels of business growth in the first quarter of the year, capturing market share in a number of key areas whilst improving product margins."

Times Recommends

• House prices falling fastest in 18 years
• Britain 'faces full-year fall in GDP'
• Savills millionaire clients feel property crunch