Lloyds sees first-quarter profits soar

published 30 April 2013

Lloyds Banking Group's first-quarter profits surged as it slashed costs and reduced bad debts.

The state-backed bank reported a statutory pre-tax profit of £2.04bn in the first quarter, up from £280m for the same period a year earlier. Underlying profit rocketed to £1.4bn from £497m.

Total underlying income of £4.8bn grew by 3.0%, and the net interest margin increased to 1.96% from 1.95%.

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Results were driven by the £394m sale of shares in St. James's Place, improvement in costs efficiency and a fall in impairment charges by 40% to £1.0bn from £1.6bn.

Costs fell 6.0% in the period and Lloyds expects annual costs to fall to just over £9.0bn in 2014.

The company's results were also supported by the absence of an additional charge to compensate customers who were mis-sold payment protection insurance (PPI).

Lloyds has already been forced to set aside £6.8bn as a result of the PPI scandal.

Markets gave a positive reaction to the figures despite the collapse last week of a deal to sell more than 630 of its branches to the Co-op. The branch sale, called Project Verde, will be sold as a stand-alone bank through a stock-market listing in 2014.

"In the first three months of 2013 the group delivered a substantial increase in both underlying and statutory profit," said Chief Executive Officer (CEO) Antonio Horta-Osorio.

"We continue to invest in our simple, lower risk, customer focused UK retail and commercial banking business model which will allow us to become the best bank for customers and further deliver on our commitment to support the UK economy, as well as delivering strong stable and sustainable results for our shareholders."

Horta-Osorio has cut 8,800 jobs since he became CEO in March 2011 when he announced a cost-reduction programme that would lead to 15,000 redundancies in total.

The bank's the core tier-one capital ratio rose to 12.5% from 12% by the end of the first quarter. It comes after the UK's new regulator Prudential Regulation Authority said Britian's banks need more capital to cushion potential risks.

Looking ahead, the company expects to reach its full-year 2013 guidance for net interest margin of around 1.98%, supported by a reduction in impairment charges.

Non-core assets will be less than £70bn by the end of 2014, Horta-Osorio added.

Shares rose 4.34% to 55.82p at 11:35 Tuesday.