Lloyds profits rise as chief executive upbeat on UK economy
The company saw pre-tax profits more than double to £1.95 billion in the three months to September 30 as the once state backed lender hailed a “strong financial performance”.
Lloyds Banking Group has unveiled a hefty rise in third quarter profits as chief executive Antonio Horta-Osorio struck a bullish tone on the state of Britain’s economy.
The company saw pre-tax profits more than double to £1.95 billion in the three months to September 30 as the once state-backed lender hailed a “strong financial performance”.
The figure compares to £811 million in the same period last year, when Lloyds was hit by payment protection insurance (PPI) provisions.
Underlying profit for the period nudged up from £1.9 billion to £2 billion and Lloyds raised its financial targets for 2017.
Mr Horta-Osorio said the UK economy remains “resilient”, although he admitted there has been some “softening” in consumer confidence following the Brexit induced collapse in the pound.
He added that although consumption is down as a result, exports will be boosted by sterling’s depreciation and pointed to record high employment.
In this context, and with inflation soaring, raising interest rates from 0.25% to 0.5% is the “right thing to do”, Mr Horta-Osorio added.
Markets are expecting the Bank of England to jack up interest rates next month and his comments come as GDP figures for the third quarter beat expectations, coming in at 0.4%.
The bank boss said he is “comfortable” with the position of the group’s motor finance arm, despite concerns of rising levels of consumer debt.
He added: “In the first nine months of the year we have delivered strong financial performance with increased underlying and statutory profit, a significant improvement in returns and strong capital generation.
“These results highlight the strength of our customer focused, simple and low risk business model and the benefits of our competitive advantage in the UK.”
Shares were broadly flat in morning trading at 67.2p.
The results build on a strong run of form for Lloyds, which was fully returned to private hands in May, nearly nine years after the Government bailed it out at the height of the financial crisis.
At the peak, Lloyds was 43% owned by the state after its bailout during the banking crisis after taxpayers were forced to inject £20.3 billion into rescuing the bank.
The group has been dogged by PPI claims, having paid out over £18 billion to date to affected customers.
However, Lloyds took no additional charges in the quarter.
PPI claim levels did increase, though, following a Financial Conduct Authority advertising campaign featuring Arnold Schwarzenegger as part of an effort to encourage people to come forward before an August 2019 deadline.
Lloyds said it saw 16,000 claims per week following the campaign, with the number then easing back to 11,000.
In the nine months to September 30, underlying pre-tax profit rose by 8% to £6.6 billion, while total income grew 8% to £4.6 billion.
The lender’s net interest margin – a key metric that shows the difference between its income from interest on loans and the amount it pays out – rose from 2.7% to 2.9%.
The group’s trading update comes as the bank and former bosses face accusations in court from shareholders that they were “mugged” during the takeover of Halifax Bank of Scotland in 2008.
Lloyds is vigorously denying the claims, but the case is likely to see former executives give evidence.
Adding to its troubles, Lloyds – which rescued HBOS at the height of the financial crisis – is still in the process of paying victims of fraud at the hands of HBOS Reading staff between 2003 and 2007, having set aside £100 million in the first quarter to deal with those compensation costs.
Among the claimants is TV star Noel Edmonds.