Lloyds Tsb (NYSE:LYG)
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Lloyds Banking Group PLC (LYG) Tuesday said it eked out a GBP2 million net profit in the first quarter, helped by lower impairment charges and falling costs as the group raised some targets for the year.
The part-government-owned lender recorded total income of GBP4.6 billion for the quarter. In the same quarter a year earlier, the group posted revenue of GBP4.92 billion and a loss of GBP2.44 billion, when it was hit by a hefty charge to cover the misselling of payment protection insurance.
On an adjusted basis--which includes factors such as the integration of HBOS and other one-off charges and asset sales--profit before tax came to GBP628 million, up from GBP284 million a year earlier. Lloyds said that the adjusted figures better reflect the performance of the group.
"Although our results reflected the subdued U.K. economic environment, the actions we have taken to further reduce costs, strengthen the balance sheet and reduce risk, and the additional investment we have made in our core franchise, are mitigating these effects and will position us well for future growth," CEO Antonio Horta-Osorio said.
Like several of its U.K.-based peers, Lloyds is suffering as the British economy sinks into recession. The combination of low interest rates, slack demand for loans and increased regulatory pressure has weighed on the bank's share price in recent months.
At the full-year results, Horta-Osorio sounded a cautious note for 2012, warning investors to brace for a difficult year. Accordingly, Lloyds' target of on return of equity between 12.5% and 14.5% was delayed beyond 2014. The group also said, without being specific, that it expects 2012 revenue to be lower than it was in 2011, as the bank continues to slim down its balance sheet. On Tuesday, Lloyds said it was "confident" it could meet its financial goals for the year.
Lloyds increased its guidance for the non-core asset reduction it expected to achieve in 2012 by GBP5 billion to at least GBP30 billion and said that it is expecting to reach its 2014 target in 2013.
As part of this process, Lloyds is expected to sell off 632 branches. The sale is mandated by the European Union because Lloyds was bailed out by taxpayers and has to be completed before the end of 2013.
Lloyds recently ended exclusive negotiations with the Co-operative Group as regulators questioned whether the funerals-to-food group was a suitable buyer. NBNK PLC (NBNK.LN), an investment vehicle set up by financial sector veterans to create a challenger bank in the U.K., has since expressed interest in the branches. On Tuesday, the group reiterated that it was continuing its discussions with both NBNK and the Co-op.
- By Max Colchester, Dow Jones Newswires; +44 (0) 207 842 9295, email@example.com