Lloyds Bank posts loss on loan insurance, swaps compensation
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.