Lloyds Banking Half-Year Profit Narrows on Compensation Charges
July 27 2017 - 3:45AM
Dow Jones News
By Max Colchester
Lloyds Banking Group PLC said Thursday half-year profits
narrowed, pinched by 1 billion pounds ($1.3 billion) of charges to
compensate customers.
The U.K. retail bank said it made a half-year net profit of
GBP1.3 billion, down 18% from GBP1.59 billion a year earlier.
The bank said that the U.K. economy continued to be "resilient"
in the wake of the Brexit vote, but that consumer confidence was
softening.
Lloyds's bottom line was hit by a number of provisions for
conduct costs. The bank said it was putting aside GBP700 million in
extra provisions to cover future payouts to customers sold
insurance products they didn't need. The provision came after a
U.K. regulator extended a deadline for claims until August
2019.
Lloyds also said it was putting in place a system to compensate
customers who were overcharged when they fell behind on mortgage
payments. It estimates this will cost GBP340 million.
Despite these charges the board recommended a dividend of 1
pence per share.
Chief Executive Antonio Horta-Osorio continued to play-down
fears of an unsecured debt bubble in the U.K. saying debt levels
remained "reasonable" and were lower than a decade ago. However, he
said some firms were lending at risky levels and should be reviewed
by regulators.
In recent months, U.K. consumer credit, which includes credit
cards, has been growing at an annualized rate of more than 10%,
over five times the rate of incomes. This has propped up the U.K.
economy after the Brexit vote, but has raised fears that banks
could be hit with big losses.
This month, Mr. Horta-Osorio outlined a management shake-up,
signalling his intention to stay at Lloyds to implement the next
leg of its strategic plan. The bank will outline its next plan in
February, following years of reshaping after its taxpayer bailout
in 2009. Earlier in 2017, the government finally shed the remnants
of its investment in the bank.
-Write to Max Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
July 27, 2017 03:30 ET (07:30 GMT)
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