Lloyds returns to profit and ups bonus pool 8pc
Lloyds Banking Group has reported it returned to profit in 2013 – the first time since its bailout six years ago.
Statutory profit before tax stood at £415m for the year – an 140 per cent increase from the £606m loss it made in 2012.
The results, said boss Antonio Horta-Osorio, confirm the 33 per cent state-owned bank is “returning to robust health”, although he flagged a climate of ongoing "regulatory uncertainty".
Despite the swing being encouraging, the profit made was a touch below analysts' expectations.
Underlying profit before tax rose to £6.2bn in 2013 – well over double 2012’s figure of £2.6bn.
Total underlying income increased six per cent to £18.8bn from £18.3bn.
Shore Capital has said Lloyds made “considerable progress” in 2013, but there's still plenty of work to do.
Reshaping the balance sheet, trimming costs and deleveraging, along with settling litigation scandals all need to happen before the bank's ready for privatisation, says Ishaq Siddiqi of ETX Capital.
The bank managed to reduce impairments to £521m, beat expectations by 33 per cent. But Investment Bank Espirito Santo has said, despite that, it maintains ‘sell’ on shares.
Bonuses
As expected, Lloyds announced it’ll hand over £1.7m in shares to chief executive Horta-Osorio. At a time when bankers' bonuses remain a topic of reproval, the bank will face close scrutiny from shareholders, government and the public.
The bank also upped its bonus pool for 2013 to £395m – up 8.2 per cent from £365m in 2012. That’s approximately two per cent of underlying revenues, as in 2012.
Compensation
The group says it put aside an additional £130m as compensation for those mis-sold interest rate heeding products in the fourth quarter.
10 days ago, it said it needs to use another £1.8bn for PPI – bringing the total it’s set aside to over £10bn. The news has left investors feeling "less than impressed", says Siddiqi.
Dividend
It also confirmed plans to apply to the Prudential Regulation Authority to restart dividend payments of at least 50 per cent of sustainable earnings in the medium term, in the second half of this year.
Lloyds hasn't paid shareholders a dividend since 2008.
Capital Requirements
Prior to any dividends, Lloyds says it expects to generate fully loaded CET1 capital of around 2.5 percentage points over the next two years, and 1.5 to two percentage points per annum from then on.
IPO of TSB
Having rebranded TSB in September, Lloyds has received an agreement in principle from the European Commission to sell the retail banking business in a public share offering this year.
Share price reaction
Shares are down over four per cent this morning.
