Lloyds turnaround continues with first half profits up 32% to £3.8bn despite hefty PPI bill and Libor fine
Lloyds Banking Group appears to have overcome recent setbacks to post underlying first half profits of £3.8billion, up 32 per cent from a year ago despite another big bill to cover payment protection insurance mis-selling.
The bank, which is 25 per cent owned by the taxpayer, said overall profits for the period were £863million, despite setting aside a further £600million to compensate customers mis-sold PPI, taking its total bill to over £10billion.
Just as Barclays did yesterday with its results, Lloyds is forecasting a slower decline in PPI complaints than previously expected, with the increased provision accounting for an extra 155,000 complaints.
Overcoming setbacks: Lloyds posted underlying profits for the six months to the end of June of £3.8billion, up 32 per cent from a year ago
Lloyds has set aside a total of £1.1billion to cover legacy issues in the first half numbers, which includes the £217million fine issued to the lender on Monday for manipulating the Libor rate during the financial crisis.
The Serious Fraud Office is currently assessing whether there is sufficient evidence to mount a criminal investigation against staff at Lloyds for defrauding taxpayers.
With this in mind, the strong results failed to rally the market and Lloyds shares were down 1.7 per cent, or 1.32p during early morning trading.
Among the good news, the lender has upgraded its net interest margin - a key measure of profitability - to around 2.45 per cent for the full year.
Chief executive Antonio Horta-Osorio said: 'It has been a successful first half for the group. With our initial three-year strategic plan now substantially complete, we are progressing our plans for how we will take the group forward into 2015 and beyond, and take advantages of the new growth phase of the UK economy.'
Horta-Osorio plans to issue an update on his proposals for the group in the autumn.
The Halifax owner said it provided one in four of all mortgages to first-time buyers in the first half, with lending of £5.7billion to more than 43,000 customers.
Overall new mortgage lending was £20billion - £6billion higher than in the first half of 2013 - while it said it lent almost £1billion through the Government's Help to Buy mortgage guarantee scheme.
Following the robust half year results, the bank said it is on track to restart dividend payments in the next year.
Commenting on the Lloyds results, Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers said: 'Progress in the period has been significant. A sharp drop in impairments has been accompanied by a hike in net interest margin, a fall in costs and a notable increase in underlying profit.
'These numbers should provide comfort in the ongoing strength of the Lloyds recovery, with the market consensus of the shares as a buy likely to remain undisturbed.'
The turnaround in fortunes for Lloyds follows in the footsteps of results from Barclays and Royal Bank of Scotland.
Last week RBS said it had nearly doubled its underlying profits to £2.65billion in the first half of the year, and while Barclays reported a slump in earnings, it surprised the market with better-than-expected pre-tax profits for the first six months of £3.35billion.
Lloyds set to meet £10bn lending target to first-time buyers
Lloyds said today it was ahead of schedule to meet a £10billion lending target to first-time buyers as it posted a 44 per cent increase in total lending to homebuyers so far this year.
Nearly 44,000 first-time buyers received £5.7billion in mortgages from Lloyds in the first six months of the year - 55 per cent higher in value and 36 per cent more in volume than during the same period last year.
Lloyds said this was down to a ‘strong housing market’ and that it now accounts for one in four of all new home loans being handed out to first-time buyers across the UK. Total new residential mortgage lending rose to £19.8billion in the first half of this year, Lloyds said.
In February, the group pledged to support at least 80,000 first-time buyers this year by committing to lend a minimum of £10billion to help them purchase their first home.
The Government’s Help to Buy scheme, which offers mortgages to people with 5 per cent deposits and in which Lloyds said it is the biggest participant, makes up 13 per cent of value of the banks’ lending to first time buyers.
It said it has lent almost £1billion through the initiative since its launch last autumn and some £892million in the first six months of the year.
Lloyds Bank also lends to borrowers with a 5 per cent deposit in England and Wales through its ‘local lend a hand scheme’, whereby local authorities put up cash-backed guarantees as additional security for a mortgage.
The number of active online users soared to more than 10million customers, including more than 4.5million mobile users, Lloyds said.
The Government said 27,167 sales have been completed under the Help to Buy equity loan scheme since its launch 15 months ago and 5,388 sales have taken place under Help to Buy: NewBuy since March 2012. Both these schemes are available in England to buy new-build properties only.
The latest figures show that 4,357 house sales were completed through the equity loan scheme in June alone, marking the highest monthly total since the scheme launched in April 2013.
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