Bank of Scotland owner Lloyds restores dividend as profits slide
Bankofscotlandownerlloyds Banking Group has seen profits slide by 72 per cent as it battles with the economic fallout from the pandemic.
The banking giant revealed the extent of the financial devastation caused by Covid-19, as statutory pre-tax profit foer 2020 fell to £1.2 billion, from £4.4bn the previous year.
The figure is ahead of the £905 million analysts had expected, according to a company-compiled consensus, and the bank said it will restart dividend payouts.
It came as Lloyds, which also owns Scottish Widows, booked impairment charges – money it sets aside for loans that could sour – of £4.2bn, compared with £1.3bn a year earlier.
That was lower than the £4.7bn that analysts were expecting, after the group notched up impairments of just £128m in the fourth quarter, compared with the £586m that had been expected.
Net income dropped 16 per cent to £14.4bn across the financial year.
Outgoing chief executive Antonio Horta-osorio said: “Looking forward, significant uncertainties remain, specifically relating to the coronavirus pandemic and the speed and efficacy of the vaccination programme in the UK and around the world.
“I remain confident that the group’s clear purpose, unique business model, significant competitive advantages and the customer-focused evolution of our strategy we have announced will ensure that the group is able to help Britnumbers
ain recover and, in so doing, help transition to a sustainable economy.”
It is the last set of full-year results for Horta-osorio, before he is replaced by Charlie Nunn, the head of HSBC’S high street banking unit.
The boss, who has led Lloyds for a decade, will become chief executive of Credit Suisse later this year. Nunn will take up the post in August, Lloyds confirmed alongside its full-year results.
The board announced that it will be bringing back dividends, which were suspended at the beginning of the Covid-19 crisis, setting an ordinary payout of 0.57p per share, the maximum allowed under Prudential Regulation Authority guidelines.
Michael Hewson, chief market analyst at CMC Markets UK, said: “With Lloyds Banking Group’s share price currently trading at its highest levels this year, [these] full-year
are set to be a fitting final legacy of outgoing CEO Antonio Horta-osorio’s tenure in his ten years as head of the bank. When he took over in January 2011, three years after the bank received a £20.5bn bailout from the UK government the bank was in a parlous state, despite a share price that was higher back then, than it is now.
“Over the last ten years the bank has returned to profitability, as well as private ownership and while it hasn’t been an easyride,by2017thebankmanaged to post a statutory profit of £5.3bn, as well as paying out the largest dividend ever to its shareholdersof£2.3bn.thelast 12 months have been a big test for the bank, let alone the UK economy, however at no time were there any questions as to whether the bank would be able to deal with the challenges posed.”
What does one make of the sale of the Borders home of comedian Rory Bremner back in December for £1 million over the asking price?
This would be a worthy media story in normal times but coming as it did just as Christmas was being cancelled and the nation was entering a second lockdown really was remarkable, especially as the property had remained stuck on the market for most of 2019, when few had heard of Covid-19.
You could say that this transaction exemplified what has been a truly remarkable 11 months for the property market which last March was expected to collapse but instead has not only survived but performed better than anyone could have expected.
But the market could yet become unstuck, ironically just as the s Covid vaccines are beginning to offer the chance of life returning to something close to normal. Accordingto Scottishgovernmentdata,residential property transactions in Scotland fell by 48 per cent between December and January from 13,570 to 7,050, numbers that show how dramatically the brakes are being applied to the Scottish housing market. With the end of the Land and Buildings Tax (LBTT) holiday on the horizon it is clear that many house sellers have taken advantage of the reduced liability but with the end in sight those volumes face a massive correction.
Like the wider economy, the sector is being propped up by the furlough scheme and concessions such as business rates relief – plus of course the temporary suspension of stamp duty/lbtt in England and Scotland (below £500,000 and £250,000 in the respective countries). In Scotland the starting point on which LBTT is paid will be reduced to £175,000 from 1 April and will apply only to first-time buyers. However it seems the Chancellor, Rishi Sunak, has still to make up this mind about the tax break
south of the Border and should he allow it to continue for a few more months there may yet be a U-turn at Holyrood. This is just one reason why the Westminster Budget, to be announced in Parliament next week, is of such importance to the housing market north as well as south of the Border.
The stamp duty concession is not just about shoring up the value of Mr and Mrs
Bloggs’s three-bedroom semi or enabling companies like my own to continue trading. Property is so fundamental to the strength of the UK economy that its collapse would have a significance far beyond the market itself.
The Chancellor’s strategy has not only allowed the sector to survive but has kept many other parts of the economy going as well while sustaining tax income from sources ancillary to housing. For example, VAT has still to be paid on legal, surveying and estate agency transactions plus a whole host of consumer purchases and services associated with moving home. Clearly limiting stamp duty/lbtt has kept a lot more people in work, beyond those directly employed in the property sector.
So hoping the Chancellor will retain the stamp duty holiday for a wee while longer (and that Kate Forbes, the Scottish finance minister will follow suit by reversing her earlier decision) is not just special pleading. With property being such a weather vane for the wider economy, keeping the housing market on an even keel will mitigate the experience of the bumpy road we all face when the furlough scheme runs down. David Alexander is managing director of DJ Alexander