Lloyds reports further progress in Q3
● Profits down by 7% to £1.8bn, but exceeds consensus, and no PPI costs
Lloyds Banking Group has reported a better-than-expected set of third-quarter results as the lender continues a strong run of form.
The bank saw a 7 per cent fall in profits to £1.82 billion in the three months to 30 September after it was hit by increased restructuring costs.
However, the figure was above consensus estimates of £1.7bn and total income for the quarter came to £4.69bn, an increase of 1 per cent.
In addition, the bank’s net interest margin – the difference between the interest received from borrowers and the amount paid out on deposits – held steady at 2.93 per cent.
Lloyds boss Antonio Hortaosorio said: “These results further demonstrate the strength of our business model and the benefits of our low-risk, customer-focused approach.
“As planned, our strategic investment has accelerated and is already delivering real benefits to customers, whilst operating costs continue to reduce.”
Lloyds booked £235 million in restructuring costs to
0 The lender said the results show the ‘strength’ of its business model
HARGREAVES LANSDOWN
cover the likes of redundancy payments to workers as it pushes ahead with a threeyear strategy that will see it focus on digital banking.
The bank has been undergoing an overhaul of its workforce and branch network, having announced hundreds of job cuts and branch closures over the past 12 months.
The group also announced that finance chief George Culmer will retire in 2019.
The results build on a strong run of form for Lloyds, which was fully returned to private
hands last year, nearly nine years after the UK government bailed it out at the height of the financial crisis.
The group has been dogged by claims related to payment protection insurance (PPI), having paid out more than £18 billion to date. However, Lloyds took no additional charges in the quarter.
That is in contrast to Barclays, which earlier this week flagged charges of £400m related to PPI.
More broadly, PPI claims have ramped up as the August 2019 deadline approaches. And earlier this week, Lloyds and investment giant Schroders confirmed they are joining forces to create a new wealth management venture.
Richard Hunter, head of markets at Interactive Investor, branded the tie-up “an interesting move with lofty ambitions”.
But he also noted the added pressure of Lloyds’ role as a bellwether for the UK economy, as did Nicholas Hyett, equity analyst at Hargreaves Lansdown.
The latter said Lloyds is “a solid UK bank that’s generating a very attractive return for shareholders, and handing back cash through dividends and share buybacks”.
But he said that prompts questions over why the bank’s share price has gone “precisely nowhere” since mid-2016.
“The issue is that its position as the UK’S largest banker to consumers and small businesses makes it very sensitive to the fate of the UK economy, and with Brexit looming large investors just can’t get comfortable with that exposure.”
However, for long-term holders, “the depressed share price means there’s an attractive 6.4 per cent dividend yield on offer, and a share buyback programme could deliver very attractive results long-term if all goes Lloyds’ way.”
“It’s a solid UK bank that’s generating a very attractive return for shareholders, and handing back cash through dividends and share buybacks”