Lloyds re­ports high­est profit in decade

The Malta Business Weekly - - FRONT PAGE -

Lloyds Bank­ing Group has re­ported its high­est an­nual profit in a decade, helped by a re­duc­tion in pay­ment pro­tec­tion in­surance pro­vi­sions. Pre-tax prof­its in­creased by 158% to £4.24bn, a level last seen in 2006 be­fore the fi­nan­cial cri­sis. Pro­vi­sions for PPI de­clined from £4bn to £1bn, bring­ing the to­tal to £17bn. The UK gov­ern­ment's stake in Lloyds has now fallen be­low 5% and it has said it wants to re­turn the bank to full pri­vate own­er­ship this year. The gov­ern­ment spent £20.3bn to ac­quire a 43% stake in Lloyds at the height of the fi­nan­cial cri­sis. It has re­turned more than £18.5bn to the tax­payer since 2009. How­ever, un­der­ly­ing prof­its for 2016 fell to £7.9bn, down from £8.1bn. To­tal in­come for the group also edged down to £17.5bn com­pared with £17.6bn the pre­vi­ous year. In ad­di­tion to the £1bn set aside in the third quar­ter to cover PPI claims, Lloyds also made a pro­vi­sion of a fur­ther £1.1bn for other "con­duct" is­sues. The com­pany has in­creased its div­i­dend by 13% and will also pay a spe­cial div­i­dend. Lloyds, which is the UK's big­gest re­tail bank­ing group, also owns the Hal­i­fax and HBOS brands. "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," said group chief ex­ec­u­tive Antonio Horta-Oso­rio. "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. "How­ever, the re­cov­ery in re­cent years with low un­em­ploy­ment, re­duced lev­els of house­hold and cor­po­rate in­debt­ed­ness and in­creased house prices means the UK is well po­si­tioned," he added. In a sep­a­rate re­port, it was re­vealed that Mr Horta-Oso­rio's to­tal pay package fell sharply last year, from £8.7m to £5.5m. The de­cline was driven mainly by a steep fall in his long-term shares award fol­low­ing the Brexit vote, which hit Lloyds stock. How­ever, his short-term bonus in­creased and his base salary went up for the first time since he joined the com­pany in 2011. Richard Hunter, head of re­search at Wil­son King In­vest­ment Man­age­ment, said Mr Horta-Oso­rio had "trans­formed" Lloyds into "some­thing of a mod­ern day suc­cess story in the af­ter­math of the fi­nan­cial cri­sis" with its re­cov­ery seem­ingly near­ing com­ple­tion. How­ever, he added: "Nat­u­rally, chal­lenges will fol­low as the UK con­sumer is show­ing some early signs of re­trench­ment, which makes the rise in the im­pair­ment num­ber a lit­tle more trou­bling. "His­tor­i­cally low in­ter­est rates will also con­tinue to pro­vide a dif­fi­cult back­drop for banks in gen­eral, whilst the cost or reg­u­la­tion - let alone any fur­ther fines dark­en­ing the pic­ture - will be a nec­es­sary cost of do­ing busi­ness. "Even so, the over­all pic­ture is one of ro­bust re­cov­ery for Lloyds, where the share price has en­joyed a strong run of late, hav­ing added 21% over the last six months alone." Lloyds shares rose by 3.6% fol­low­ing the re­sults, mak­ing the bank the big­gest riser on the FTSE 100.

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