Britain’s state-rescued Lloyds Banking Group said on Friday that net profits rose by 31 per cent in the first half, despite setting aside further funds for compensation for insurance mis-selling.
Advertisement
The bank, which is 15% owned by the British government, said net profit for the six months came in at GBP677 million, compared with GBP574 million in the same period last year, as impairment charges continued to drop.
Other than the mounting PPI total, Lloyds’ first-half results told a largely positive story, with profits up 38% to £1.4bn and a pledge by Mr Horta-Osorio to return surplus capital in the form of share buybacks and special dividends.
But the PPI provision was higher than the market had anticipated and lifted the bank’s total cumulative number to £13.5bn.
The company continues to expect other income to be broadly stable in 2015, and full year-cost: income ratio to be lower than full year 2014 ratio of 49.8 percent.
Lloyds Banking Group joined the “groundhog week” for UK banks on Friday when it said above-forecast profits were slashed by compensation costs.
Chief executive Antonio Horta-Osorio said the addition of a further PPI provision was “disappointing” but that the bank was able to take the action “from a position of financial and capital strength”.
Earlier this month, the Financial Times estimated the “drip feed” disposal has brought in £13bn, with the remaining shares valued at around £9bn.
Lloyds, which employs 6,000 staff in Calderdale, said PPI complaints were falling at a slower rate than expected.
“We have delivered significant improvements in both underlying and statutory profitability, while at the same time strengthening the balance sheet, improving our customers’ experiences and continuing to support and benefit from UK economic growth”, Horta-Osório said in a statement.
This was in spite of a £1.4bn fine relating to a PPI investigation and £660m charge stemming from the sale of TSB.
Around £175m was set aside over the mis-selling of packaged bank accounts – though Lloyds denied that this area might become “the next PPI scandal”.
Analyst Richard Hunter at Hargreaves Lansdown said the results confirmed Lloyds’ recovery was firmly on track.
Advertisement
He added that the lender was undergoing a “digital revolution” with more than 11 million online users and almost six million using its mobile services. The retail offer is expected to take place in February or March 2016 and would see a portion of shares sold at a five per cent discount to their market value.
