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Lloyds profits more than double to £4.2bn Lloyds profits more than double to £4.2bn
(35 minutes later)
Lloyds Banking Group’s profits have more than doubled as the bailed-out bank shrugged off the Brexit vote and avoided further hefty charges for payment protection insurance mis-selling.Lloyds Banking Group’s profits have more than doubled as the bailed-out bank shrugged off the Brexit vote and avoided further hefty charges for payment protection insurance mis-selling.
Its profits of £4.2bn are the highest for a decade and shares in the bank rose by 4%.Its profits of £4.2bn are the highest for a decade and shares in the bank rose by 4%.
The bonus pool at the bank, in which taxpayers own a stake of just under 5%, increased by 11% while its chief executive António Horta-Osório was paid £5.5m for 2016.The bonus pool at the bank, in which taxpayers own a stake of just under 5%, increased by 11% while its chief executive António Horta-Osório was paid £5.5m for 2016.
Unlike at rival bailed-out bank Royal Bank of Scotland, shareholders are receiving a dividend of 3.05p per share, including a special payment of 0.5p.Unlike at rival bailed-out bank Royal Bank of Scotland, shareholders are receiving a dividend of 3.05p per share, including a special payment of 0.5p.
Speculation has swirled that Portuguese banker will walk away once the final part of the taxpayer’s holding in the bank is sold off – probably by May. But he said: “The job is never done. I’m very happy at Lloyds.”Speculation has swirled that Portuguese banker will walk away once the final part of the taxpayer’s holding in the bank is sold off – probably by May. But he said: “The job is never done. I’m very happy at Lloyds.”
The bank’s profits have been weighed down in recent years by the cost of bad lending at HBOS – the bank that Lloyds took over during the 2008 financial crisis – and £17bn of charges to cover PPI compensation.The bank’s profits have been weighed down in recent years by the cost of bad lending at HBOS – the bank that Lloyds took over during the 2008 financial crisis – and £17bn of charges to cover PPI compensation.
The bank avoided taking another provision for PPI in the last quarter of the year which helped bolster its profits from £1.6bn a year ago. Underlying profits were down.The bank avoided taking another provision for PPI in the last quarter of the year which helped bolster its profits from £1.6bn a year ago. Underlying profits were down.
Even so, the bank’s total PPP charge for the full year amounted to £1bn – down from £4bn a year ago. It also took another charge of £1bn during the year to other compensation payouts, including a new £475m provision in the fourth quarter for complaints related to packaged bank accounts and other problematic products. Even so, the bank’s total PPP charge for the full year amounted to £1bn – down from £4bn a year ago. It also took another charge of £1bn during the year for other compensation payouts, including a new £475m provision in the fourth quarter for complaints related to packaged bank accounts and other problematic products.
Those provisions meant that the bank sliced 19% off its bonus pool – taking it to £393m, still 11% higher than last year.Those provisions meant that the bank sliced 19% off its bonus pool – taking it to £393m, still 11% higher than last year.
Horta-Osório, whose pay fell from £8.7m a year ago, said: “Given our UK focus, our performance is inextricably linked to the health of the UK economy which has been more resilient than the market expected post-referendum, with GDP growth of 2% in 2016. The UK’s decision to leave the European Union means the exact nature of our relationship with Europe going forward remains unclear and the economic outlook is uncertain.”Horta-Osório, whose pay fell from £8.7m a year ago, said: “Given our UK focus, our performance is inextricably linked to the health of the UK economy which has been more resilient than the market expected post-referendum, with GDP growth of 2% in 2016. The UK’s decision to leave the European Union means the exact nature of our relationship with Europe going forward remains unclear and the economic outlook is uncertain.”
Lloyds’ shares plunged to 48p after the referendum result in July and have since risen 40% but remain below the 73p average price that taxpayers paid for 43% stake during 2008 and 2009. Their 4% rise after the results were announced took the price to 69p.Lloyds’ shares plunged to 48p after the referendum result in July and have since risen 40% but remain below the 73p average price that taxpayers paid for 43% stake during 2008 and 2009. Their 4% rise after the results were announced took the price to 69p.
While the fall in the shares has prevented the government carrying out its plan to conduct a cut-price offering to retail investors, Philip Hammond has sanctioned a sell-off of the shares below the average price paid for them. As a result, the taxpayer is no longer the largest shareholder in the bank – which had been since the 2008 crisis. While the fall in the shares has prevented the government carrying out its plan to conduct a cut-price offering to retail investors, Philip Hammond has sanctioned a sell-off of the shares below the average price paid for them. As a result, the taxpayer is no longer the largest shareholder in the bank – which it had been since the 2008 crisis.
Gary Greenwood, banks analyst at Shore Capital, said the bank was increasing its guidance for profits – measured by net interest margin – for this year. “Guidance for 2017 would appear to be better than implied by consensus market estimates, notably in respect of the net interest margin but also on the impairment ratio and capital generation.”Gary Greenwood, banks analyst at Shore Capital, said the bank was increasing its guidance for profits – measured by net interest margin – for this year. “Guidance for 2017 would appear to be better than implied by consensus market estimates, notably in respect of the net interest margin but also on the impairment ratio and capital generation.”
There was some scepticism about the bank’s ability to achieve these goals. Sandy Chen at Cenkos said: “We don’t see much to revise our long-held scepticism about Lloyds’ ability to achieve its lofty long-term targets.”There was some scepticism about the bank’s ability to achieve these goals. Sandy Chen at Cenkos said: “We don’t see much to revise our long-held scepticism about Lloyds’ ability to achieve its lofty long-term targets.”
Horta-Osório apologised to victims of the HBOS Reading fraud – for which two former HBOS bankers were jailed this month – but provided no updates on whether compensation might be paid to small business customers caught up in the £245m scandal.Horta-Osório apologised to victims of the HBOS Reading fraud – for which two former HBOS bankers were jailed this month – but provided no updates on whether compensation might be paid to small business customers caught up in the £245m scandal.
Neither was there any information about potential job cuts following the £1.9bn acquisition of the MBNA credit card business announced in December. Horta-Osório said no further deals were on the cards.Neither was there any information about potential job cuts following the £1.9bn acquisition of the MBNA credit card business announced in December. Horta-Osório said no further deals were on the cards.