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
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Life and Style
fashion
Arts and Entertainment
tv
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

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there