Lloyds looking good with help of Widows

Published on Friday 22 February 2008 09:22

LLOYDS TSB said its Scottish Widows insurance and investment business arm had put in another strong performance last year as the bank announced a six per cent increase in annual profit.

Britain's fifth-biggest bank continued the banking sector's reporting season with news of an increase in underlying profit over 2007 to 3.92 billion.

And Lloyds largely shrugged off the turmoil that has hit banks recently because of the credit crisis sparked by the sub-prime mortgage situation in the US, taking a hit of just 280 million. Although that is higher than the 200m it had originally flagged it is far less than the 1.6bn writedown that rival Barclays booked earlier this week.

The bank, which also owns Cheltenham and Gloucester noted, however, that stripping out the effects of the credit crisis, profits were ahead by 13 per cent at 4.2bn.

The lender – which saw more than a million new retail accounts opened last year – said it had managed to weather the financial sector storm because of its "prudent approach to risk".

Profit at its core retail banking arm was up by 17 per cent to 1.81bn while its wholesale and international banking unit's profit fell 12 per cent to 1.44bn after the writedown. Bad debt charges within its UK retail arm dropped 14m to 1.22bn.

Chairman Sir Victor Blank said: "'I am delighted to report that the group has continued to deliver a strong trading performance, notwithstanding the significant recent turbulence in global financial markets.

"Our higher quality, lower risk, business model has been clearly demonstrated in the resilience of our earnings stream."

But he warned that 2008 would see the turbulence in the markets continue as world economic growth slows down.

Lloyds said its Edinburgh-based Scottish Widows operation continued to make "strong progress in each of its key business priorities". Pre-tax profit increased by 183m, or 26 per cent, to 884m.

It also said that Widows had paid a further 1.9bn dividend to its parent over 2007, taking the total paid over the past three years to 3.6bn. And at its Scottish Widows Investment Partnership (SWIP) business, profit was up 52 per cent at 44m, "reflecting higher margins and (an] improved mix of external business".