Lloyds profits jump 23% despite fresh PPI hit of £550m | Business
Profits at Lloyds Banking Group jumped by almost a quarter in the first half of the year despite taking another hit of £550m to cover claims from mis-sold payment protection insurance.
The high street lender said pre-tax profits rose 23% to £3.1bn in the six months to 30 June, on higher interest income and lower costs. An additional £460m PPI provision in the second quarter took the half-year charge to £550m – which was hefty but less than the £1bn Lloyds put aside at the same time last year.
The firm’s total PPI bill has climbed to £19.2bn – the highest of all UK banks – and the rate of claims has picked up as the deadline approaches. Lloyds receives around 13,000 claims a week, more than the 11,000 a week it had expected, and said this was because of the final cut-off of 29 August 2019. It said that every 1,000 claims a week above that level would cost the bank another £150m.
Lloyds has sold 16m PPI policies since 2000 and has dealt with claims on 53% of those policies, it said.
Striking an upbeat note as the first-half results were announced, the chief executive, António Horta-Osório, said the UK economy continued to “demonstrate resilience”, with unemployment low and the weaker pound boosting trade. He said there was a “very high probability” that the UK would achieve a deal with the EU by 30 November, when the government is due to present a Brexit deal to MPs.
Lloyds is firmly focused on the UK, with only two branches in mainland Europe, one in Berlin and one in Amsterdam. It is converting those branches into a subsidiary based in Berlin by the end of the year, with staff numbers unaffected at 300 in Berlin and 100 in Amsterdam.
Horta-Osório said credit quality in the UK was stable and was unfazed by the prospect of rising interest rates. Lloyds assumes rates will go up by 0.25 points this year and in each of the next two years. The Bank of England is widely expected to lift borrowing costs from 0.5% to 0.75% when it announces its latest policy decision on Thursday.
Horta-Osório noted that while household debts across the country had increased over the last three years, they were still 25% lower than before the financial crisis, excluding mortgages.
He pledged to maintain the largest branch network in the UK, despite 49 branch closures announced in April. He said the closures reflected changes in customer behaviour, with Lloyds the biggest digital bank in the UK. It has nearly 14 million active digital users, including 10 million mobile banking users.
The government sold its remaining stake in Lloyds last year, nine years after taxpayers bailed out the bank with £20bn after its takeover of HBOS at the height of the financial crisis.
However, Lloyds has come under pressure over how it handled fraud at its HBOS Reading unit. The bank stuck to its £100m provision for the fraud for which two former HBOS employees were jailed, and said it was in the process of paying compensation to the victims of the fraud, who include the TV presenter Noel Edmonds. The firm has made offers to 67 customers and 56 of them have accepted.
Lloyds shares rose 1.6% after the results were announced and the interim dividend increased to 1.07p a share.