Lloyds is ‘on track’ for return to private ownership despite losses
LLOYDS yesterday shrugged off new losses, mis-selling charges and a tough economic backdrop to claim it remained on track to return to private ownership.
Bad debts had been slashed by a third and underlying profit was up in the third quarter, partly offsetting another £1 billion provision for missold payment protection insurance. (PPI)
Excluding PPI, Lloyds, which includes Halifax and Bank of Scotland, doubled underlying profit to a better-than-expected £840 million. For the nine months to end-September underlying profits leapt 148 per cent to £1.9bn, helping lift the shares by 8 per cent or 8.3p to 43.9p
Lloyds expects to have cut its costbase to about £10bn by end-2012 – a reduction of £1bn since 2010 and two years ahead of the original plan.
Chief executive Antonio Horta-
Osorio hailed the new funding-for-lending scheme launched in August by the Bank of England and the Treasury as a “significant incentive for lending”.
Lloyds had tapped the scheme for £1bn in September and would draw down more before the end of 2012, he said, adding that there was a three-month lag between the loans to households and businesses being approved and being disbursed to customers, and so “the first results of the scheme are going to be seen in December and January next year”.
One analyst commented: “Lloyds are working their way through the mis-selling and the toxic loans. Underlying, it is reasonably solid.”
Horta-Osorio said: “We have made further significant progress this quarter, improving underlying performance in a challenging environment…we remain confident that, by delivering our strategy to be a simple, customer-focused UK retail and commercial bank, we can rebuild the trust of our customers and other stakeholders and can deliver sustainable returns for our shareholders over time.”
Horta-Osorio revealed that in the three months to end-September Lloyds cut its bad debt writedowns to £1.3 billion.
Trading progress had been such that the bank said its bad debts for 2012 were expected to fall to about £6bn – £1.2bn less than expected at the start of the year. The bank’s net interest margin – the difference between what it charges for loans and gives on deposits – rose to 1.93 per cent from £1.91 per cent, while Lloyds’s core tier one capital ratio was a robust 11.5 per cent.
Lloyds said it had also continued to cut its exposure to troubled eurozone countries including Greece, Spain, Portugal and Ireland. Non-core assets were cut £30.7bn to £110bn in the first nine months of 2012.
Horta-Osorio said the achievements were achieved “in spite of significant legacy issues we are facing” since the takeover of HBOS in 2009 and “an economic environment that is worse than a year ago”.
He said the group was “on track” in its three-to-five year journey to get taxpayers their money back. It came as Lloyds posted a £144m pre-tax loss in the latest quarter, pushed into the red by another £1bn charge for mis-selling PPI, pushing its PPI bill so far to £5.3bn. The pre-tax loss compared with a loss of £607m a year earlier.
The group also took a £150m hit related to insurance business litigation in Germany involving its Clerical Medical subsidiary.
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