Part-nationalized Lloyds Banking Group unveiled a 10 billion pound ($14.28 billion) loss for 2008 and said it had not finalized a plan to put billions of pounds of assets into a UK government-backed insurance scheme.

Lloyds said talks with the UK government on an asset insurance scheme were 'well advanced' and chief executive Eric Daniels told Reuters he would provide an update 'reasonably shortly.'

But he declined to comment on how much would be put into the scheme while he was 'in the middle of negotiations.'

The bank, which is 43 per cent owned by the government, had been expected to announce it was putting over 250 billion pounds of assets into the plan.

By 0820 GMT Lloyds shares were down 8.5 percent at 68.6 pence, giving up some of their 31 percent surge on Thursday when they were helped by optimism that terms of the plan would be more favorable than earlier expected.

'They haven't managed to conclude a deal on asset protection, and we think the uncertainty will lead to disappointment,' said Simon Willis, analyst at NCB Stockbrokers.

The so-called asset protection scheme launched by Britain's Treasury on Thursday is expected to insure well over 500 billion pounds worth of assets by the time other banks have signed up.

Lloyds said the outlook also remained tough and 'the short-term outlook for the enlarged group is challenging.'

'Impairments will continue to run at high levels, especially in the higher risk parts of the legacy HBOS portfolios,' it said.

HBOS - the mortgage lender Lloyds took over in January - suffered a 2008 statutory loss of 10.8 billion pounds, hit by 9.9 billion pounds of losses on soured corporate loans, rising homeowner bad debts and credit market exposure.

The former Lloyds TSB business made a statutory profit of 807 million pounds, down from 4 billion pounds, as its impairments jumped to 3 billion pounds.

HBOS's loss was in line with guidance Lloyds gave two weeks ago in a profit warning. It indicates that the combined group made a statutory loss of 10.1 billion pounds, compared with a combined profit of 9.4 billion in 2007.

The massive loss came a day after rival Royal Bank of Scotland reported a 24 billion pound loss, the biggest in UK corporate history, and said the government's stake could rise as high as 95 percent as it put 325 billion pounds of assets in the UK protection scheme.

Lloyds bought HBOS in a government-backed deal after the owner of the Halifax neared collapse due to its overdependence on wholesale borrowing.-Reuters