Lloyds sees profits plunge

Part-nationalised Lloyds Banking Group today insisted that its EU-imposed sale of 632 branches was on track as it unveiled a huge loss in the first half of the year.





Lloyds, which is 40.2% state-owned, reported a £3.3 billion pre-tax loss in the six months to June, compared to a £1.3 billion profit last year, as the cost of the payment protection insurance (PPI) scandal took its toll.



The UK's biggest lender, which owns Halifax, Bank of Scotland and Cheltenham and Gloucester, set aside £3.2 billion to cover compensation for customers who were mis-sold PPI.



Lloyds is being forced by the EU to sell branches in return for the £20 billion in state aid it received following the 2008 credit crisis.



Chief executive Antonio Horta-Osorio refused to confirm the number of organisations who have approached the bank over the sale process after reports suggested interest had been disappointing.



He said: "We can confirm we have had a number of credible approaches and they have been in line with our expectations."



He added: "We are confident we will find a buyer."



Lloyds is understood to be in talks with six parties, of which only two - new bank venture NBNK and Co-Op Bank - have made formal expressions.



Stripping out the provision set aside for customers mis-sold PPI, the bank saw underlying profits plunge 31% to £1.1 billion as it struggled with the "subdued" economic climate.



Mr Horta Osorio, who announced 15,000 job losses in his vision for the business in June, said the performance was "resilient" despite the economic challenges and regulatory uncertainty.



But at less than 40p - a two-year low - the bank's share price price is a long way off from the 63p at which the Government would break even if it was to sell its stake.



The group slashed its dependence on emergency funding from central banks and governments - notably the Bank of England and HM Treasury - by £60 billion in the period - with the total standing at £37 billion.



Lloyds reduced its bad debt losses by 17% to £5.4 billion as improvements in its wholesale division offset a deterioration overseas, most significantly in Ireland, where the property market continues to fall.



The impairment charge for Ireland increased to £1.8 billion in the period, from £1.6 billion last year. A further 11% of the £27.6 billion loans in Ireland became impaired, resulting in 64% of the portfolio now being impaired.



The Group also took a charge of £70 million in the first half of this year as a result of losses arising from the earthquake in New Zealand.



But the bank said it still expects further reductions in bad debt losses in 2011 compared to last year.



The decline in underlying profits is partly down to a decline in net interest margins - the gap between what a bank charges for loans and what it pays to borrow - from 2.12% to 2.07%.



Lloyds said it was on track to meet its full year target for the Project Merlin agreement with the Government, after it extended £21.2 billion of gross lending to businesses in the period, including £6.7 billion for small businesses.



Shares were down more than 4% after today's results were published.



Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: "The foundations for the longer term aim of a more agile and efficient organisation are slowly being put in place, and the company's dominance in savings and mortgages in the UK provide support."

PA

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
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: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee