Lloyds TSB earmarks pounds 1bn for acquisitions as profits soar again

Lloyds TSB hit the acquisition trail yesterday, saying it was looking to spend up to pounds 1bn a year of surplus capital. Sir Brian Pitman, chairman, said buying other businesses was its preferred route, with insurance and pensions thought to be a top priority, but he reassured the City that if the bank could not find deals at the right price it would hand its excess funds back to shareholders.

Sir Brian was speaking after Lloyds TSB announced record interim profits of pounds 1.5bn, a third higher than the pounds 1.1bn achieved in the first six months of 1996. Thanks to the recent acquisition of the minority shareholding in its Lloyds Abbey Life insurance operation, earnings per share rose even more quickly, up 49 per cent to 20.4p.

The bank's shares soared 60.5p to 736p as the market digested the results, which were at the top end of expectations, and a 26 per cent jump in the half-time dividend to 5.3p. Analysts focused on a sharp rise in the bank's return on equity to 40.4 per cent, driven, Sir Brian said, by rising income and a continuing fall in the bank's costs.

Lloyds TSB has been one of the biggest beneficiaries of the market's upward re-rating of the financials sector over the past year. The bank's shares traded at just 315p at the end of June 1996, less than half their current level. The market value of Lloyds TSB has risen during that period from pounds 16bn to almost pounds 40bn.

The ratio of costs to income at Lloyds TSB fell from 57.7 per cent a year ago to 51.1 per cent and Peter Ellwood, chief executive, said he would be disappointed if that proportion did not fall further as the full benefits of 1995's merger with TSB flowed through. He added that the combined group was well on track to achieving the pounds 400m of savings it had promised by 1999.

Asked whether Lloyds TSB's acquisition ambitions might include an investment bank, Sir Brian retorted: "not a hope. I wouldn't touch one with a barge- pole." Unlike its high street rivals Barclays and NatWest, Lloyds has long espoused a focus on retail banking where it has been able to earn high returns without the perceived volatility of investment banking.

Retail financial services produced the lion's share of first half profits, pounds 962m compared with pounds 794m a year ago. Profits from mortgages were 18 per cent higher at pounds 293m, while retail banking rose 44 per cent to pounds 441m. Although slightly lower at pounds 228m (pounds 239m), the insurance result included a pounds 50m provision to cover the rising cost of the pensions mis-selling scandal, bringing the total set aside to pounds 250m.

Mr Ellwood said Lloyds was spending pounds 100m on its computer systems and he was confident Lloyds' systems would be "millennium-proofed" by the end of 1998.

Start your day with The Independent, sign up for daily news emails
News
people
News
A survey carried out by Sainsbury's Finance found 20% of new university students have never washed their own clothes, while 14% cannot even boil an egg
science...and the results are not as pointless as that sounds
Sport
Sean Abbott
cricketSean Abbott is named Australia's young cricketer of the year
News
i100
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea