Lloyds sees profits plunge
Thursday 04 August 2011
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."
- 1 Vladimir Putin says Russia will fight for the right of Palestinians to their own state
- 2 Ohio Democrat Teresa Fedor speaks out during abortion debate to reveal she has been raped – and is interrupted by laughter from Republicans
- 3 Germanwings plane crash: I have depression. That doesn't make me a psychopath
- 4 The West has it totally wrong on Lee Kuan Yew
- 5 The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat
Vladimir Putin says Russia will fight for the right of Palestinians to their own state
Ohio Democrat Teresa Fedor speaks out during abortion debate to reveal she has been raped – and is interrupted by laughter from Republicans
Germanwings plane crash: Investigators may have already found remains of suspected killer co-pilot Andreas Lubitz
Children take eight Isis captives to be beheaded in latest propaganda video
The battle for the Middle East's future begins in Yemen as Saudi Arabia jumps into the abyss
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
The West has it totally wrong on Lee Kuan Yew
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...