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
ebooksAn unforgettable anthology of contemporary reportage
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

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Syria civil war: Meet the military commander who says his soldiers will not rest until every inch of their war torn country is free of Islamist 'terrorists'

‘We won’t stop until Syria is back to normal’

Near the front lines with Islamist-controlled towns where Assad’s troops were besieged just last month, Robert Fisk meets a commander confidently preparing his soldiers for battle
The inside story of how Bill Clinton built a $2bn global foundation may undermine Hillary's chances

The inside story of how Bill Clinton built a $2bn global foundation...

... and how it may undermine Hillary's chances in 2016
12 best olive oils

Extra-virgin, cold-press, early-harvest, ultra-premium: 12 best olive oils

Choosing an olive oil is a surprising minefield. Save yourself the hassle with our handy guide
Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back