Lloyds Banking Group
has taken a £745m hit from its TSB branch network, denting profits at
the bailed-out bank in the first three months of the year.
But shares in the bank jumped more than 7% to above 83p as analysts considered whether to upgrade their profit and dividend forecasts.
António Horta-Osório, the Lloyds boss, who was paid £11.5m in 2014, said in February the bank would pay a dividend for the first time since the 2008 bailout. An increase in the bank’s capital cushion during the first three months of the year has helped fuel expectations that the size of the payout could rise rapidly in the future.
The 11% fall in profits to £1.2bn in the first three months of this year was largely caused by Lloyds being forced to sell off its 631-strong TSB branch network, imposed as a condition of its 2008 taxpayer bailout.
Lloyds said it would take no further charges from TSB, which is being sold to the Spanish bank Sabadell. The £745m hit includes the cost of running the bank and a £660m charge for helping the buyer build new IT systems.
The government originally took a 43% stake in Lloyds but this has fallen to 20.95% through a series of share sales. The stake could drop another percentage point in the coming days under the terms of a sell-off plan being adopted by the government, which breaks even when the share price is above 73p.
Profits were also boosted by the lack of any further provision for payment protection insurance compensation, which has cost the bank £12bn since 2011, and a fall in bad debt charges which were just £177m, down by 59%.
The finance director, George Culmer, was careful not to rule out any further PPI charges and pointed out the bank still had £1.7bn set aside for compensation payments. “A number of risks and uncertainties remain, in particular the total expected future complaint volumes,” the bank said.
The bank also signalled the bad debt charge would rise through the rest of the year but less quickly than it had anticipated, and it would remain in sharp contrast to the first year of its bailout when the bad debt charge was £13.4bn.
Horta-Osório focused on a 21% rise in underlying profits to £2.1bn. “We have made a strong start to the next phase of our strategy to become the best bank for customers and shareholders, as we continue to support and benefit from UK economic growth,” he said.
Analysts at Shore Capital said the reduced guidance on future bad debt charges and an improvement in the bank’s net interest margin – a measure of profitability – indicated that profit forecasts may need to be raised.
“Unlike peers that have reported so far, there were no further legacy charges,” Gary Greenwood at Shore Capital, said. Royal Bank of Scotland set aside £856m for more conduct-related matters, while Barclays set aside nearly £1bn for PPI and other conduct issues.
But shares in the bank jumped more than 7% to above 83p as analysts considered whether to upgrade their profit and dividend forecasts.
António Horta-Osório, the Lloyds boss, who was paid £11.5m in 2014, said in February the bank would pay a dividend for the first time since the 2008 bailout. An increase in the bank’s capital cushion during the first three months of the year has helped fuel expectations that the size of the payout could rise rapidly in the future.
The 11% fall in profits to £1.2bn in the first three months of this year was largely caused by Lloyds being forced to sell off its 631-strong TSB branch network, imposed as a condition of its 2008 taxpayer bailout.
Lloyds said it would take no further charges from TSB, which is being sold to the Spanish bank Sabadell. The £745m hit includes the cost of running the bank and a £660m charge for helping the buyer build new IT systems.
The government originally took a 43% stake in Lloyds but this has fallen to 20.95% through a series of share sales. The stake could drop another percentage point in the coming days under the terms of a sell-off plan being adopted by the government, which breaks even when the share price is above 73p.
Profits were also boosted by the lack of any further provision for payment protection insurance compensation, which has cost the bank £12bn since 2011, and a fall in bad debt charges which were just £177m, down by 59%.
The finance director, George Culmer, was careful not to rule out any further PPI charges and pointed out the bank still had £1.7bn set aside for compensation payments. “A number of risks and uncertainties remain, in particular the total expected future complaint volumes,” the bank said.
The bank also signalled the bad debt charge would rise through the rest of the year but less quickly than it had anticipated, and it would remain in sharp contrast to the first year of its bailout when the bad debt charge was £13.4bn.
Horta-Osório focused on a 21% rise in underlying profits to £2.1bn. “We have made a strong start to the next phase of our strategy to become the best bank for customers and shareholders, as we continue to support and benefit from UK economic growth,” he said.
Analysts at Shore Capital said the reduced guidance on future bad debt charges and an improvement in the bank’s net interest margin – a measure of profitability – indicated that profit forecasts may need to be raised.
“Unlike peers that have reported so far, there were no further legacy charges,” Gary Greenwood at Shore Capital, said. Royal Bank of Scotland set aside £856m for more conduct-related matters, while Barclays set aside nearly £1bn for PPI and other conduct issues.
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