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Lloyds £14bn car finance arm growth threatened by Jaguar Land Rover cuts

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Burgeoning growth at Lloyds Bank's £14bn motor finance arm could be hit by Jaguar Land Rover's recent malaise.

JLR today confirmed plans to cut 1,000 jobs and slash production at two of its West Midland plants. Britain's biggest car manufacturer has come unstuck as demand for diesel cars has plunged.

Jaguar sales have fallen 26 per cent so far this year and with Land Rover 20 per cent lower.

Loans by Black Horse, Lloyds' motor finance arm, last year swelled by more than £2bn to £13.7bn, according to the lender's 2017 financial statements. Almost half of this growth (49.7 per cent) was from a strategic tie-up with JLR to finance customer car sales.

First launched in 2014, the partnership is due to expire in 2019. During a full-year earnings call, Lloyds group director of retail Vimlesh Maru said: "Obviously we will be looking at continuing that relationship with JLR."

Today, Lloyds declined to comment on the future of the relationship beyond 2019.

Read more: Brexit is not the driving force behind Jaguar Land Rovers problems

Goodbody banking analyst John Cronin said: "As the book seasons, loan growth will slow down."

Most of Britain's car financing is delivered by the manufacturers' own financing arm as a way of generating additional profits as wafer-thin new car margins continue to be squeezed amid a tough new car market.

Lloyds is the independent car finance market leader, providing funding through Black Horse for retail customers with auto-lease services delivered by subsidiary Lex. Black Horse also has car financing agreements with Subaru and Mitsubishi.

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