LLOYDS BANKING GROUP is poised to write off as much as £13 billion on its loans to commercial property, businesses and mortgage holders as the crisis engulfing the taxpayer-backed bank deepens.

First-half results due to be posted in three weeks will show that its losses are accelerating, in spite of recent suggestions that the worst of the recession is over.

UBS analysts expect Lloyds to announce a bottom line half-year loss of £6.3 billion as a result of the soaring provisions.

The writeoffs for the first six months of the year would match the losses recorded by Lloyds TSB and HBOS in 2008, as they consummated their disastrous merger. The expected bad debt charge is almost twice what Lloyds paid for HBOS when they came together under the government’s watch last autumn. Total writeoffs for this year at Lloyds could exceed £20 billion.

The bad debts come as the bank struggles to find a new chairman to replace Sir Victor Blank, who has agreed to stand down following pressure from UKFI, the government’s shareholder body, which owns 43% of the bank’s shares.

A number of the City’s biggest fund managers have warned Lloyds not to press ahead with the appointment of Sir Win Bischoff to the role.

Although Bischoff had been widely tipped to get the job, a wave of resistance has emerged. Investors believe he is tainted by his former role as chairman of Citigroup, which has received a series of bailouts from American taxpayers.

Bischoff is also close to Eric Daniels, the chief executive of Lloyds and a former colleague at Citigroup. Many of Lloyds’ biggest shareholders are keen for the new chairman to find a replacement for Daniels over time — a job they fear Bischoff may not have the stomach for.

City grandee Chris Gibson-Smith has also been linked to the job, although investors have queried how he would be able to dedicate the time needed for it, given his existing position as chairman of both the London Stock Exchange and British Land.

Lloyds is also fighting off a full-frontal assault from Brussels, over claims it may have benefited too much from state aid.

Neelie Kroes, the European Union’s competition commissioner, warned two weeks ago that she was examining both Lloyds and Royal Bank of Scotland, and she threatened to break them up. Analysts say that when the huge provisions are put to one side, Lloyds is now highly profitable and has a dominant market share in the UK. Daniels is confident that, in the long term, investors will enjoy enormous benefits from the marriage of the two banks.

Alistair Darling, the chancellor, and Tom Scholar, his most senior civil servant, have made a number of submissions to Kroes in recent days pressing the case for the banks to remain intact.

The Treasury argues that the UK’s bail-out programmes have been much tougher on banks than similar deals around Europe. According to banking sources, however, EU officials are concerned that Lloyds and Royal Bank of Scotland are gaining too big a share of certain markets.

Ironically, their rising market shares are partly due to government pressure to pump more lending into the real economy. John Kingman, the chief executive of UKFI, will reveal his strategic plan on Monday. He is expected to say that the taxpayer banks should be allowed to lend profitably, irrespective of government pressure.

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