Lloyds swings to Q4 profit as it boosts dividend
LONDON: Lloyds Banking Group Plc, Britain’s largest mortgage lender, boosted its dividend and said lending margins would hold up this year amid record-low UK interest rates as the bank swung to a fourth quarter profit.
Pretax profit was £973mil (US$1.22bil), compared to a loss of £507mil a year earlier, the London-based bank said in a statement yesterday. Excluding one-time charges, profit rose 2% to £1.79bil, topping the £1.71bil average of seven analyst estimates compiled by Bloomberg News.
Chief executive officer Antonio HortaOsorio, 53, is looking to protect Britain’s largest consumer bank from the pressure of record-low interest rates by eliminating jobs and expanding in higher-margin lending with the acquisition of Bank of America Corp’s MBNA UK credit card business.
Lloyds said its net interest margin would be more than 2.7% in 2017 before the MBNA purchase, higher than many analysts had forecast.
“We have delivered strong financial performance in 2016 as we continue to make good progress against our strategic priorities,” Horta-Osorio said in the statement. “Strong capital generation, which is a consequence of our business model, has enabled us to fully cover the expected capital impact of the MBNA acquisition, increase our ordinary dividend by 13% and pay a special dividend.”
Lloyds shares climbed 4.1% to 69.49 pence at 8:01 am in London trading, the biggest jump since December.
Although Lloyds shares have climbed this year, the bank is still below where it traded before Britain voted to leave the European Union in June. BlackRock Inc replaced the UK government as the largest shareholder last month as the state continues to gradually shed its stake.
Lloyds said it would pay an ordinary dividend of 2.55 pence per share and a special dividend of 0.5 pence per share, up from total payouts of 2.75 pence a year earlier. The firm’s core Tier 1 capital ratio, a measure of financial strength, rose to 13.8% from 13.4% at the end of September.
The net interest margin, the difference between income from lending and the cost of funding, fell to 2.68% from 2.69% in the third quarter. Impairments fell 16% from a year earlier to £196mil. Revenue fell 2% to £4.35bil.
The bank had more than £800mil of onetime items, including £475mil of conduct charges and £232mil of restructuring costs.
Chief financial officer George Culmer said the conduct provisions, which related to issues including claims over packaged bank accounts, were “disappointing,” and the bank expects them to fall in future periods.
Lloyds didn’t take any provisions for the payment protection insurance scandal in the quarter, after a £2.1bil charge in the year-earlier quarter drove that period’s loss.
The lender has taken more than £17bil in provisions since 2011.— Bloomberg