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Lloyds Bank profits hit by bond buyback | |
(about 4 hours later) | |
First quarter profits at Lloyds Banking Group have nearly halved after the bank was hit by the cost of buying back high income bonds. | |
Pre-tax profits for the three months to March fell to £654m, mainly due to a £790m charge for redeeming the bonds, called "enhanced capital notes". | |
However, chief executive Antonio Horta-Osorio said Lloyds' performance in the quarter had been "robust". | |
Underlying profits dipped 6% to £2.05bn for quarter. | |
Mr Horta-Osorio said the bank had "continued to make good progress". | |
No further provisions were made for PPI compensation, where complaint levels were running at an average of 8,500 a week, broadly in line with expectations. | |
The enhanced capital notes were issued in 2009 to raise capital in the wake of the financial crisis. | |
Lloyds redeemed the remaining £3bn of the bonds in the first quarter of the year in a move that could save the bank about £1bn over the next four years. | |
Shares in Lloyds were down 2.6% at 67.3p in afternoon trading. | |
Lloyds was rescued by the government during the financial crisis, which left the state holding a 43% stake in the bank. | Lloyds was rescued by the government during the financial crisis, which left the state holding a 43% stake in the bank. |
The government has been steadily reducing its stake and now holds less than 10%. | The government has been steadily reducing its stake and now holds less than 10%. |
In January, the chancellor postponed the sale of the government's final stake in Lloyds, blaming the turmoil in financial markets. | In January, the chancellor postponed the sale of the government's final stake in Lloyds, blaming the turmoil in financial markets. |
Mr Horta-Osorio has cut thousands of jobs and said Thursday's results reflected the bank's "simple, low risk business model." | Mr Horta-Osorio has cut thousands of jobs and said Thursday's results reflected the bank's "simple, low risk business model." |
Lloyds, which is the largest retail bank in Britain, said total income fell 1% to £4.38bn as higher revenue from its retail bank was offset by lower income from its insurance division. | Lloyds, which is the largest retail bank in Britain, said total income fell 1% to £4.38bn as higher revenue from its retail bank was offset by lower income from its insurance division. |
On Wednesday, Barclays reported a 25% drop in profits for the first quarter of the year. | On Wednesday, Barclays reported a 25% drop in profits for the first quarter of the year. |
It had set expectations low, warning it had been hit by the same headwinds that have hit profits across most of the world's biggest banks. | It had set expectations low, warning it had been hit by the same headwinds that have hit profits across most of the world's biggest banks. |