Lloyds warns Carney against rate cut to zero

THE Bank of England should cut interest rates by 0.25% soon but should not lower them to zero or even contemplate negative rate s, the chief executive of Lloyds Banking Group said today.

“This a very important decision for the monetar y polic y committee,” Antonio Horta-Osorio declared.

“It is likely the MPC will lower rates by 25 basis points in the next few weeks or months, which will marginally benefit borrowers and disadvantage savers.

“But they will not go intoto negative territory because that sends out a ver y ne g a t ive signal to the economy and we have seen what sort of effects it has across Europe.”

He also said that the bankk had no plans to follow RBSS in warning its business customers that they could be charged for depositing money with Lloyds if rates, set by the Bank under Governor Mark Carney, fall further.

Horta-Osorio (pictured) made it very clear what he expects post-Brexit: “Following the EU referendum, the outlook for the UK economy is uncertain and, while the precise impact is dependent upon a number of factors, including EU negotiations and political and economic events, a deceleration of growth seems likely.”

But he said the UK was going into this period from “a position of strength” and said the bank would continue to generate cash strongly.

Lloyds’ headline profits fell by 5% to £4.2 billion in the first half on total income down 1% at £8.9 billion.

Bad debts rose by almost a third to £245 million.

The bank stuck with its forecast of a net interest margin of 2.7% — being the difference between what it charges borrowers and pays savers — for the rest of the year but said it could not forecast beyond that because of uncertainties over Brexit.

It raises the half-year dividend by 13% to 0.85p, which was less than the 1p some analysts had hoped for. LloyLloyds also lowered its forecast fo for how much cash it would generate this year, adding to doubts about how much it can raise the final dividend, which pushed the share price down by 1.65p to 54.1p. That i s we ll be l ow the aveaverage 73p paid by the taxpayer, which means any plan to resurrect a sale of the final 9% stake to retail investors seems a long way off.

Lloyds raised its cost-cutting target from £1 billion to £1.4 billion by the end of 2017 with an extra 3000 job cuts and 200 branch closures confirmed today.

The bank also said it would sell 30% of it s no n - b r a n c h p ro pe r t i e s , o r around 40 office blocks. Many of these are likely to be in London.

This will cost about £300 million but will then save around £100 million a year and a one-off £100 million if they had been refurbished.