Belfast Telegraph

Lloyds revival cranks up the heat on banks

By Holly Williams

Further signs of a revival in fortunes for UK banks emerged yesterday after Lloyds Banking Group racked up bigger-than-expected profits of £1.6bn.

The half-year surplus smashed City hopes and marked a "significant milestone" for the taxpayer-backed bank after last year's £4bn loss.

Lloyds said its figures were helped by a more than halving of bad debts, which had brought the group to its knees during the financial crisis.

The figures add to a strong interim results season so far and reinforce prospects for a profitable exit from the Government-owned bank assets.

But the sector's apparent return to health has increased the pressure on firms to lend more to businesses.

Lloyds, which is 41% owned by the taxpayer after a rescue bail-out two years ago, claimed it was ahead of its Government-set targets as gross lending to businesses reached £24bn in the first half.

However, only £5.7bn of this was to small businesses and the bank admitted firms were still paying back more than they were borrowing.

David Cameron met with Bank of England governor Mervyn King yesterday when lending levels were likely to have been top of the agenda.

Mr Cameron this week called for cash to be diverted from bonuses and executive pay to the "real economy".

This followed a warning from George Osborne ahead of this week's earnings, saying the sector had an "economic obligation" to lend to firms.

Business Secretary Vince Cable has already suggested dividends and bonuses should be targeted in a "carrot and stick" approach to boost lending to cash-strapped small firms.