LLOYDS revved up its turnaround on Thursday and flagged up talks with the regulator about restoring dividend payouts, paving the way for the government to start selling down its 39 per cent stake in the bank.
Antonio Horta-Osorio, group chief executive – unveiling a £2 billion half-time pre-tax profit after a £456 million loss last time – said: “We have done our part and now the ball is in their [the government’s] court. The government now has a clear chance of giving taxpayers a profit.”
Lloyds’ shares jumped 5.53p or 8.1 per cent to a three-year high of 74p on the strong results – more than 20 per cent above the 61p the government regards as break-even on its £20.5bn state bailout in the 2008 financial crisis.
It came as the City also cheered another milestone in the bank’s return to health as it said it would hold talks with regulators in the second half of 2013 over a timetable for reviving shareholder dividend payouts.
Lloyds has not paid a divi since mid-2008 just before its disastrous acquisition of HBOS. Horta-Osorio said he believed Lloyds would eventually be a high dividend paying bank because it was “not a highly capital intensive bank … more than 50 per cent of our results should be available for dividends”.
He also confirmed plans to unveil the bank’s rebrand of 631 branches nationwide as TSB Bank on 9 September with an advertising blitz costing £30m.
TSB, however, will remain a Lloyds subsidiary until it is floated on the stock market next June, with its own independent board and chairman.
The divestment was ordered by the European Union in return for Lloyds’ taxpayer bailout, and the flotation option was pursued after a deal to sell the branches to the Co-operative Bank collapsed because of a black hole in the latter’s balance sheet.
Separately, Lloyds also announced yesterday that it is to open three “scale” Halifax branches in Scotland by next spring. The first will open in Aberdeen’s Union Street in December, followed by branches in “central retail locations” in Edinburgh and Glasgow next year.
David Nicholson, Halifax’s group director, said the brand had 1.5 million customers in Scotland, who “are buying Halifax [products] through digital, but there are some things they cannot get through digital”.
During the first six months of 2013 Lloyds saw a 43 per cent plunge in bad debts to £1.8bn, and its profit came despite taking another £500m hit for the mis-selling of payment protection insurance (PPI).
Lloyds has now set aside £7.3bn to cover the mis-selling of PPI, the most of any UK bank. Horta-Osorio said: “Of course, we are not happy about this. Unfortunately we cannot commit again that this is the end of it [PPI provisions].”
He added that the additional provision was not due to an acceleration of claims, but to extra costs associated with the investigation of the mis-selling.
Lloyds’ high-street retail arm lifted profit to £1.7bn (£1.4bn), with digital banking now having more than 10 million users. Profits at commercial banking, lending to medium-sized firms, rose to £954m from £926m, while profits at wealth, asset finance and international climbed to £296m from £201m.