Lloyds head warns of 2012 squeeze
The boss of Lloyds Banking Group left taxpayers wondering when they will get their money back as he warned the state-backed lender would be squeezed further in 2012.
After unveiling a £3.5 billion loss for 2011, chief executive Antonio Horta-Osorio said the part-nationalised lender would come under pressure this year as a weak economy, heavier regulation and political interference rocked the sector.
But the Portuguese banker, who recently waived his annual bonus after an extended period of sick leave, said the bank was "in a significantly stronger position than it was 12 months ago" and would offset lower income with additional savings.
The 40% state-owned bank saw shares slide 2% to 35.98p - a little over half the 63p price tag paid by the Government for its stake in the throes of the financial crisis.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "Following on from RBS, Lloyds is another work in progress, making some headway but still with much to do."
The £3.5 billion loss, which compares with a £281 million profit the previous year and was driven by a £3.2 billion hit to tackle the payment protection insurance scandal, came as the bank unveiled a £375 million bonus pool, down 30% against 2010. The average bonus was £3,900 for each of its 100,000 staff.
However, stripping out the PPI charge and other one-off costs, the bank made a £2.7 billion profit in 2011, up 21% on the same measure in the previous year. Lloyds said its income slipped 10% to £21.1 billion, but it slashed its bad debt charges by 26% to £9.8 billion.
Mr Horta-Osorio reiterated earlier warnings that the bank expects its income-related targets to be delayed as a result of the weaker-than expected economic outlook.
He said he expects "a subdued economy, continued high levels of regulatory scrutiny and political uncertainty" in the banking sector as well as ongoing instability in the eurozone. The bank's combined exposure to troubled eurozone countries Portugal, Ireland, Italy, Greece and Spain totalled £25 billion, of which £16 billion related to Ireland.
However, Lloyds said it expected to increase cost savings by a further £200 million this year - but insisted this would not involve any additional job losses to the 15,000 already announced last year.