Bank of Scotland owner Lloyds posts big profit and unveils £400m acquisition: reaction

Bank of Scotland owner Lloyds Banking Group has swung to a £3.9 billion half-year profit from losses a year ago after becoming the latest big lender to cut bad debt provisions thanks to the UK’s economic recovery.

The group’s figures showed a boost to its bottom line from a further £333 million fall in bad debt provisions over its second quarter.

A total release of £837m of cash put aside for loans expected to turn sour in the pandemic saw it return to statutory profit for the first half of 2021, from losses of £602m a year earlier. Lloyds also announced a 0.67p-a-share interim dividend.

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The results came a day after it emerged that rival Barclays had generated profits well in excess of what was expected in the first six months of the year after it released cash it had set aside during the early days of the coronavirus crisis.

Bank of Scotland owner Lloyds Banking Group has become the latest big lender to cut bad debt provisions thanks to the UK’s economic recovery. Picture: Ian Rutherford

Alongside its latest numbers, Lloyds unveiled a deal worth around £390m to buy savings and pensions firm Embark, which has a growing presence in Dundee.

The group said the deal – its biggest since it returned to private ownership four years ago – will see it add about 410,000 customers and some £35bn of assets under administration.

Antonio Lorenzo, chief executive, Scottish Widows and group director, insurance and wealth, Lloyds Banking Group said: “There’s an ever-growing customer demand for clear, simple and affordable financial planning and retirement products and services.

“Our acquisition of Embark will not only help us serve all of a customer’s financial needs in one place, but also sit alongside our existing partnerships which meet the more complex financial planning and investment requirements of mass-affluent and high net-worth customers through Schroders Personal Wealth and Cazenove Capital.

“Through Embark’s technology, we will be able to increase the reach of our investment offerings for customers who are happy to manage their own portfolios, through modern, easy to use technology.

“We will also be able to enhance our intermediary proposition, strengthen our offering in retirement and modernise the way Scottish Widows works with advisers, recognising the continued value of advice.”

Lloyds’ interim chief executive William Chalmers, who is leading the bank until new boss Charlie Nunn arrives next month, said: “During the first six months of 2021, the group has delivered a solid financial performance with continued business momentum, bolstered by an improved macroeconomic outlook for the UK.

“While we are seeing clear progress in the vaccine rollout and emergence from lockdown restrictions, the coronavirus pandemic continues to have a significant impact on the people, businesses and communities of the UK.”

Donald Brown, senior investment manager at wealth management firm Brewin Dolphin, said: “Lloyds’ results build on Barclays’ the day before, with many of the same themes pointing to a banking sector on the road to recovery – significantly higher profits, lowering provisions for bad loans, and a generally more positive outlook on UK plc.”

Richard Hunter, head of markets at Interactive Investor, noted: “Lloyds is riding the wave of generally improving conditions, upping its guidance for the year with further bad loan releases boosting its numbers.”

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