Row over £790m bonds halves Lloyds profits
PROFITS at Lloyds halved in the year’s first quarter as a battle over a bond buyback took its toll.
The bank was forced to shell out £790m to buy high-interest bonds from investors who didn’t want to lose them because they offered a solid return.
It led to a High Court case and although Lloyds won, the cost of acquiring the bonds hit earnings. Profits fell to £654m, from £1.2bn a year earlier.
The picture was not helped by the loss of TSB, which brought in £118m last year but has since been spun out as a separate bank. Despite the hit, analysts insisted the picture was not as bleak as it first appeared.
Laith Khalaf of Hargreaves Lansdown said: ‘Lloyds stands in contrast to the other UK banks, which are quite a long way behind in terms of getting their houses in order.’
The bank’s underlying profits before one-off costs were broadly flat at £2.1bn, down from £2.2bn. And no extra money was set aside for compensation for the mis-selling of PPI as the lender looks to draw a line under the scandal.
However, continued low interest rates mean Lloyds is still putting the squeeze on savers to maintain its income.
The net interest margin – the difference between the rate at which savings earn interest and the rate borrowers are charged – went up from 2.6pc to 2.74pc. The higher this is, the bigger the bank’s profit.
The bank would not be drawn on the size of this year’s dividend.