Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

Lloyds £2.9 billion profit paves way for stake sale

Lloyds £2.9 billion profit paves way for stake sale

Lloyds Banking Group has announced an underlying profit of £2.9 billion for the first half of the year to 30 June, almost triple the £1 billion of the same period last year. Statutory profit was £2.1 billion, reversing a loss of £456 million last year.

Earnings per share were 2.2p, turning around a loss of 1.0p per share in the same period last year.

However total underlying income was up more modestly, at £9,464 million, after £9,246 million in the first six months of 2012. Without the £530 million contribution during the first six months of St James's Place, underlying revemue would have fallen by 2% compared to the previous half year.

Costs were sharply reduced, from £5,045 million in the first half of last year down to £4,749 million. Asset sales were up tenfold, from just £80 million last time to £897 million.

The bumper profit could pave the way for a sale of the government's £19 billion stake in Lloyds. There have been reports that UK Financial Investments, which manages the government's 39% stake, and the Treasury will discuss a placing of shares in Lloyds with major institutional investors. The taxpayer currently owns 27.6 billion ordinary shares in Lloyds. The government is said to regard 61.2p as its break-even price for a sale.

The costs of the payment protection insurance (PPI) scandal continue to soar. The bank said costs continue to remain 'higher than expected' and it has upped its provision by £450 million of which £250 million is for redress and £200 million for administration costs. Lloyds has set aside a further £50 million to cover the potential costs of the Financial Conduct Authority's investigation into its claims handling process. This brings the total provision for PPI costs up to £7.275 billion, of which £1.65 billion has so far been unitilised as at 30 June. 

Lloyds Banking Group shares rose by 6.5% or 4.49p to 72.96p on the announcement in early morning trading.

The shares have more than doubled in the past year, as investors have been impressed by the bank's lower costs, lower bad debts and asset sales, including stake sales in restricted advice firm St James's Place.

However not all investors are impressed by Lloyds. Neil Woodford, head of UK equities at Invesco Perpetual, said in mid July that he had no intention of buying a stake in Lloyds or any other UK-focused high street bank and did not expect to do so for some time.

'This is because I cannot quantify the risk of dilution through future capital raisings and remain concerned about the extent of loan losses sitting in these banks’ balance sheets, awaiting recognition in the coming years as and when they have enough capital to absorb them,' he said.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Your Business: Cover Star Club

Profile: how career burnout led to a family office launch

Profile: how career burnout led to a family office launch

I was burnt-out from a career in finance and had no desire to come back, says the founder of Blu Family Office

Wealth Manager on Twitter