Lloyds profits flat after charges take toll on BOS owner

● Termination of contract with Standard Life Aberdeen leads to first-quarter hit

of Scotland owner Lloyds Banking Group has warned that ongoing Brexit uncertainty could take a further toll on the UK economy after reporting flat profits.

First-quarter statutory pretax profits were flat at £1.6 billion as the group revealed a further £100 million charge for paymentprotectioninsurance (PPI) claims following a surge ahead of the deadline for submissions.

The Scottish Widows owner also booked charges of £126m for restructuring and another £339m, including an estimated charge for the exit fee for ending its bumper contract with asset manager Standard Life Aberdeen (SLA).

Onanunderlyingbasis,there was a better-than-expected 8 per cent rise in underlying profits to £2.2bn for the three months to the end of March.

The bank declined to break out the charge set aside for the SLA contract break fee. It comes after a tribunal recently ruled Lloyds did not have the right to end the hefty £100bn contract with the asset management giant.

Lloyds said it remained on track to meet is full-year goals.

Antonio Horta-osorio, group chief executive, said: “While Brexit uncertainty persists, and continued uncertainty could further impact the economy, I remain confident that our unique business model, and in particular our market-leading efficiency and targeted investment, will continue to deliver superior performance and returns for our customers and shareholders.”

His comments follow similar cautionary remarks last week from rival Royal Bank of Scotland over the potential negative impact of Brexit.

Lloyds said it now does not expect another interest rate rise until next year at the earliest as Brexit worries hold back business spending and the deal outcome remains unclear given the recent sixmonth delay to the EU departure.

The bank remained tightbank lipped on whether it plans to launch further share buybacks after regulators on Wednesday allowed the lender to free up around £1bn in capital.

John Moore, senior investment manager at Brewin Dolphin, said: “[These] results build on the good news about the bank’s capital guidance and reaffirm it as one of the financially strongest banks, paving the way for a potential share buyback or higher dividends.

“However, whether that happens will depend on the economic cycle and it’s worth noting that, in a departure from the bank’s last update, we have a statement on ‘Brexit uncertainty’.”

Laith Khalaf, senior analyst at Hargreaves Lansdown, noted: “Lloyds’ decision to terminate its business with Standard Life Aberdeen is costing the bank a pretty penny.

“We’re not told precisely how much, but combined with other miscellaneous items it adds up to a £339m hit in the first quarter. Add in an extra £100m in PPI charges and that leaves reported profits flat on last year.”