Lloyds becomes Britain's new economic bellwether In those 14 words, the bank has neatly summed up the problems it and the wider economy are currently facing. Essentially, it tells us that business confidence remains low, that consumers still have too much debt and will be continuing to pay down their borrowings rather than going on the spending splurge the government would like, and finally that borrowing costs are rising. Lloyds chief executive, Antonio Horta-Osorio, has put great emphasis on his cost-cutting plans and internal restructuring, but without growth none of this will mean a great deal as the fortunes of Lloyds are deeply entwined with the performance of the country as a whole. As fast as Mr Horta-Osorio can cut, along come higher funding costs to wipe out the gain. Just look at the bank's closely-followed net interest margin which fell by 0.21pc to 1.95pc as a direct result of this. Citigroup analysts are already predicting an even bigger hit to profits from next month's expected downgrade of the bank's credit rating by Moody's, which the US bank thinks could decrease next year's earnings by as much as 16pc. There are certainly some bright spots in Lloyds' results, but even these point to a less than rosy future. The much heralded shrinkage in the size of the balance sheet, though welcome, points to a less profitable future. As Credit Suisse put it more succinctly this morning, a shrinking balance sheet means the bank's "earnings power" is diminished. Like the British economy, Lloyds is finding that dealing with its legacy problems is having a direct impact on its ability to chart what it hopes will be a more profitable path in future.