Lloyds Bank posts loss on loan in­surance, swaps com­pen­sa­tion

The Pak Banker - - FRONT PAGE -

Lloyds Bank­ing Group Plc, Bri­tain’s big­gest mort­gage lender, re­ported a full-year loss af­ter set­ting aside a fur­ther 1.5 bil­lion pounds ($2.3 bil­lion) to com­pen­sate cus­tomers wrongly sold loan in­surance.

The net loss nar­rowed to 1.43 bil­lion pounds from 2.8 bil­lion pounds in the year-ear­lier pe­riod, the Lon­don-based lender said in a state­ment Fri­day. An­a­lysts had pre­dicted a 1.45 bil­lion-pound loss, ac­cord­ing to the me­dian es­ti­mate of eight sur­veyed by Bloomberg.

Chief Ex­ec­u­tive Of­fi­cer An­to­nio Horta-Oso­rio’s ef­forts to turn around the 39 per­cent government-owned lender are be­ing stymied by past mis­takes, such as the im­proper sale of loan in­surance, which has cost the lender about 6.8 bil­lion pounds in com­pen­sa­tion pro­vi­sions, more than any other U.K. lender.

“The pos­i­tive spin would be they’ve pulled it for­ward and the neg­a­tive spin would be it’s worse than ex­pected and there’s more to come,” said Ian Gor­don, an an­a­lyst at In­vestec Plc (INVP) in Lon­don, who rates Lloyds a sell. The bank also in­creased its pro­vi­sion for wrongly sold in­ter­est rate swaps by 310 mil­lion pounds, Lloyds said. The lender didn’t pro­vide an es­ti­mate for how much it may have to set aside to set­tle al­le­ga­tions of Li­bor-rig­ging. “We are now ahead of plan in cre­at­ing a com­pet­i­tive ad­van­tage through a re­duced risk pre­mium and best-in-class ef­fi­ciency,” said Horta-Oso­rio, 49. “We ex­pect this to en­able us to re­turn to prof­itabil­ity.”

The shares climbed 1.4 per­cent in Lon­don trad­ing yes­ter­day, bring­ing its gain for the year to 14 per­cent. The government paid the equiv­a­lent of about 61 pence a share when it bailed out the lender fol­low­ing its ac­qui­si­tion of HBOS Plc in 2008, ac­cord­ing to Lloyds. Bri­tain’s big­gest banks have put aside more than 13 bil­lion pounds for PPI com­pen­sa­tion.

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