Lloyds (LLOY.L and LYG) Swings to Profit in 1st Quarter...YES!
Lloyds Banking Group LLOY.LN +1.12% PLC Tuesday swung to a substantial profit in the first quarter of the year, as impairment charges dropped and the bank didn't have to put aside money to cover the wrongful sale of financial products.
The 39%-government-owned bank said it made a net profit of £1.53 billion ($2 billion) in the first three months of the year, compared with a £5 million loss the same period last year. First-quarter revenue, net of insurance claims, was £5.9 billion, up from £4.88 billion the year before.
The increase was driven by higher income, which includes the gain of £394 million relating to the sale of shares in wealth manager St. James's Place, continued cost-cutting and a reduction in impairment charges.
Lloyds May Sell International Wealth Business
The bank's results were also helped by the fact that they weren't weighed down by provisions to reimburse customers wrongfully sold financial products. The last time Lloyds presented results without putting aside cash to cover the misselling of payment-protection insurance was in the last quarter of 2011.
Payment-protection insurance was widely sold alongside an assortment of financial products, including loans and credit cards, to cover customers' repayments should they fall sick or lose their job. Lloyds has so far put aside £5.28 billion to compensate claimants.
In the past three months, the bank has announced a series of moves to bolster its capital position and refocus on its core U.K. retail business. The bank offloaded a 20% stake in the wealth manager St James's Place and is looking to sell its asset-management arm Scottish Widows Investment Partnership. The move comes as the Bank of England's Financial Policy Committee issued a report outlining a £25 billion capital shortfall across the U.K. banking sector.
On Tuesday, the bank said it was waiting for the regulator to outline any eventual capital shortfall. Lloyds said it was confident in its capital position.
Lloyds Banking Group Plc (LLOY), Britain’s biggest mortgage lender, said profit jumped almost threefold in the first quarter as impairments for souring loans dropped by more than analysts had estimated.
Pretax profit before exceptional items rose to 1.48 billion pounds ($2.3 billion) from 497 million pounds in the year- earlier period, beating the 1.03 billion-pound median estimate of nine analysts surveyed by Bloomberg. Provisions fell 40 percent to 1 billion pounds, beating the 1.1 billion-pound median analyst estimate, the London-based bank said in a statement today.
I would expect analyst price targets will be increasing in the coming days.