Friday reported higher profit in its first half, benefited by increased net interest income and margin as well as lower impairment.
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The bank also took an additional £435 million hit for other misconduct provisions, including £117 million for a previously-announced settlement with the Financial Conduct Authority (FCA) over its handling of PPI complaints. But it is now considering whether to use its excess capital to pay a special dividend or launch a shares buyback.
Chief Executive António Horta-Osório said that Lloyds is “well positioned” as regulators emphasise the importance of protecting consumers and its small business customers.
The pay-outs will help to support on-going efforts by the government to sell down its stake in Lloyds, which has fallen from 43 per cent at the height of the banking crisis to 15 per cent now.
Having dropped 1.5 per cent in Friday trading, shares are now priced at 84.6p, still well above the 73.6p break-even price for the Treasury.
Despite all that, Lloyds still boosted profits by 38% to almost £1.2bn in the first half of the year. “I understand the political commitment to a retail share offer and we will do whatever is needed”.
Any decision to cease a sale that has been extremely successful in turning a profit for the taxpayer would be controversial.
“I think that was a critical point in enabling the government to sell 10pc of the bank in only six months, that amounts to around £6bn in only six months”. That missed the 1.9 billion-pound average estimate of 20 analysts compiled by the bank.
Culmer said: ‘We categorically don’t see this as the next PPI scandal.’ He added that Lloyds is upholding three in ten complaints about packaged accounts, compared with eight in ten about PPI.
If complaints remain at the same level, it will need to set aside a further £1billion at the end of the year.
Shares fell as this overshadowed an improved half-year performance.
“We aim to outgrow the market in this under-represented area”, Horta-Osorio said at the time.
He expects the rate to start falling significantly over the next 18 months but if it does not it could cost the bank a further £3 billion over that time.#.
The future looks bright.
Lloyds paid out its first dividend since the financial crisis earlier this year, again of 0.75 percent.
Lloyds’ strategy includes developing its digital offering and reducing costs.
The latest provision was around £400million more than had been expected as complaints have continued to flood in.
One issue for investors to be note is the seemingly never-ending saga of mis-selling compensation payments.
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Lloyds’ total provisions for PPI have now reached 13.4 billion pounds.
