Lloyds will return to profit after fall in bad debt rates

Strong trading so far this year boosts outlook for the partly state-owned bank

Lloyds Banking Group will swing back to profitability this year thanks to faster-than-expected improvements in bad debt rates and strict cost-cutting, the Government-backed bank revealed yesterday.

Annual results for 2009, published last month, recorded £6.3bn of losses at Lloyds, which was crippled by its Treasury-engineered takeover of the ailing HBOS last January and, after £20bn-worth of bailouts, is now 41 per cent owned by the state.

But an unexpected trading update –released yesterday in advance of a conference presentation next week by Eric Daniels, Lloyds' chief executive – confirmed that the first 10 weeks of 2010 have seen "strong" trading and the bank is "pleased with performance against each area of recent guidance".

Existing forecasts regarding Lloyds' plans to boost margins from 1.8 per cent to 2 per cent, and slice out annual costs of £2bn by 2011, remain unchanged, the group said. But a clearer view of debt trends, particularly in the bank's retail business, is behind the battered group's first forecast of a return to the black.

"Impairment provisions are currently trending at lower levels than anticipated and as a result the group now expects to deliver a better impairment performance than previously guided," the bank said yesterday. "The group believes that it will be profitable on a combined businesses basis in 2010."

The company stressed that the revised forecasts result from improved internal modelling and do not reflect an improvement in the bank's "cautious" economic outlook, or improving trends in the housing market.

Alongside the mountainous debts revealed with the 2009 financial results, Lloyds revealed bad loans and charges associated with the HBOS takeover soared by £9bn to £24bn during 2009. But it was already clear that the worst was over. Losses peaked in the first six months of 2009, dropped by 21 per cent between the first and second halves, and were expected to continue falling similarly this year.

Although not willing to commit to a specific figure yesterday, Lloyds says "toxic" debt losses will now fall more sharply in both halves of 2010. The group's stock was the top riser on the FTSE 100 yesterday, rising 8 per cent to 60.13p, raising speculation from some City analysts that the Government's stake could even be sold before the general election.

Elsewhere in Britain's nationalised banking industry, Bradford & Bingley reported annual losses of £196m for 2009. The results came in £71m ahead of expectations and £82m lower than the previous year's losses. But bad-loan losses shot up from £468m to £884m, of which fraud and professional negligence accounted for £388m, the majority of which related to property valuations, the firm revealed. B&B was taken over by the Government in 2008 and its savings business sold to Santander.

"We have made substantial progress against our business objectives and met all of the financial goals in our agreed business plan," B&B's managing director, Richard Banks, said yesterday. "We have completed our restructure to create an organisation that is fit for purpose to deliver a high-quality service whilst reducing costs, minimising losses and delivering value to the taxpayer."

News
scienceExcitement from alien hunters at 'evidence' of extraterrestrial life
Life and Style
Customers can get their caffeine fix on the move
food + drink
News
newsRyan Crighton goes in search of the capo dei capi
Extras
indybest

PROMOTED VIDEO
Arts and Entertainment
Actors front row from left, Jared Leto, Jennifer Lawrence, Meryl Streep, Ellen DeGeneres, Bradley Cooper, Peter Nyongío Jr., and, second row, from left, Channing Tatum, Julia Roberts, Kevin Spacey, Brad Pitt, Lupita Nyongío and Angelina Jolie as they pose for a
film
Sport
sport
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Life and Style
news

As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”

Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
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

Market Administrator (1st line Support, Bloomberg, Broker)

Negotiable: Harrington Starr: Market Administrator (1st line Support, Trade Fl...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Data Support Analyst (Linux, Solaris, Windows Server, Reuters)

Negotiable: Harrington Starr: Data Support Analyst (Linux, Solaris, Windows Se...

Helpdesk Support Engineer (Windows, MS Office, Exchange)

Negotiable: Harrington Starr: Helpdesk Support Engineer (Windows, MS Office, E...

Day In a Page

All this talk of an ‘apocalyptic’ threat is simply childish

Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
Mafia Dons: is the Camorra in control of the Granite City?

Mafia Dons: is the Camorra in control of the Granite City?

So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Once the poor relation, the awards show now has the top stars and boasts the best drama
What happens to African migrants once they land in Italy during the summer?

What happens to migrants once they land in Italy?

Memphis Barker follows their trail through southern Europe
French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

Frank Mugisha: 'Coming out was a gradual process '

Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

Radio 1’s new top ten

The ‘vloggers’ signed up to find twentysomething audience
David Abraham: Big ideas for the small screen

David Abraham: Big ideas for the small screen

A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

Florence Knight's perfect picnic

Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

Horst P Horst comes to the V&A

The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

Mark Hix's summery soups

Soup isn’t just about comforting broths and steaming hot bowls...
Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

Tim Sherwood column

I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
Eden Hazard: Young, gifted... not yet perfect

Eden Hazard: Young, gifted... not yet perfect

Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
Tim Howard: I’m an old dog. I don’t get too excited

Tim Howard: I’m an old dog. I don’t get too excited

The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

Tom Peck on Match of the Day at 50

The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition