Advertisement

Lloyds sees underlying profits soar as costs reduce - UPDATE

UK banking group Lloyds saw underlying profits soar in 2012 but was forced to take further provisions for Payment Protection Insurance (PPI) redress in the fourth quarter.

UK banking group Lloyds saw underlying profits soar in 2012 but was forced to take further provisions for Payment Protection Insurance (PPI) redress in the fourth quarter.

Underlying profit increased from £638m to £2.61bn last year, as costs reduced by 5.0% to £10.1bn. This cost reduction was in line with the strategic review target but two years ahead of plan.

Advertisement - Article continues below

However, the company registered a statutory loss of £570m for 2012, mainly due to PPI provisions totalling £3.58bn, £1.5bn of which was booked in the fourth quarter alone. The bottom line also includes £3.21bn of gains from sales of government securities.

Chief Executive Antnio Horta-Osrio said: "The substantial progress we made in 2012 means that we are now ahead of our plan to transform the group, and this was reflected in our stronger underlying financial performance in the year."

He said that since the bank's strategy was set out in June 2011, it has significantly strengthened the balance sheet, improved efficiency an focus while continuing to work through "legacy issues".

Strong capital generation meant that the core-tier one capital ratio increased to 12.0%. Capital ratios were helped by the continued non-core asset reduction of £42.3bn during the period, some £17bn more than the initial guidance.

"We are creating a business of which customers and colleagues can be proud of, and which I am confident will help Britain prosper, and deliver strong, stable returns to shareholders," he said.

Advertisement - Article continues below

2013 outlookAs for the current financial year, the company said that costs are expected to fall further to £9.8bn.

Underlying profits are expected to increase further due to the improvement in portfolio quality and a substantial reduction in impairment charges.

Furthermore, Lloyds expects to reduce the non-core asset base by at least £20bn in 2013, putting it on track to achieve its target of a non-core asset portfolio of £70bn or less by the end of next year.

Bonus poolThe total bonus pool at the bank for 2012 was £365m, down 3.0% year-on-year. The company said that the reduction was applied to a greater degree to senior staff.

The average value of bonus per employee was £3,900, similar to 2011.

Horta-Osrio was awarded a £1.5m bonus in deferred shares for his work in 2012. The shares will not be released until 2018 and depend on Lloyds' share price at the time and the price of the government's sale of company stock, the remuneration committee said.

"The board believes that these additional conditions are in the interests of all shareholders and support our common aim of repaying the taxpayer," Lloyds said.

Advertisement
Advertisement

Recommended

Visit/investments/investment-strategy/601044/broker-safety-your-questions-answered
Investment strategy

Broker safety – your questions answered

Cris Sholto Heaton answers more of your questions about the safety of stockbroker accounts
25 Mar 2020
Visit/investments/investment-strategy/600861/how-demographics-affects-stock-valuations
Investment strategy

How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.
24 Feb 2020
Visit/investments/stocks-and-shares/600863/sirius-minerals-anglo-american-takeover
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020
Visit/investments/stockmarkets/600634/why-investors-should-be-cautiously-bullish-for-2020
Stockmarkets

Why investors should be “cautiously bullish” for 2020

Analysts have been out in force making rosy predictions for stockmarkets in 2020, but while there is certainly a case for optimism, investors should r…
17 Jan 2020

Most Popular

Visit/investments/commodities/industrial-metals/601401/money-printing-infrastructure-base-metals-copper
Industrial metals

Governments’ money-printing mania bodes well for base metals

Money is being printed like there is no tomorrow. Much of it will be used to pay for infrastructure projects – and that will be good for metals, says …
27 May 2020
Visit/investments/investment-strategy/601389/are-you-a-permabear-three-red-flags-to-watch-out-for
Investment strategy

Are you a permabear? Three red flags to watch out for

Contrarian investors are often seen as bearish because the market tends to go up over time. But if that bearishness goes too deep, you risk seriously …
26 May 2020
Visit/economy/eu-economy/601422/heres-why-investors-should-care-about-the-eus-plan-to-tackle-covid-19
EU Economy

Here’s why investors should care about the EU’s plan to tackle Covid-19

The EU's €750bn rescue package makes a break-up of the eurozone much less likely. John Stepek explains why the scheme is such a big deal, and what it …
28 May 2020