Aug. 01--Lloyds raised the tantalising prospect of a dividend for its 2.7m long-suffering shareholders even as a pounds sterling 1.1bn charge for misconduct decimated its profits.
The state-backed lender confirmed it had set aside another pounds sterling 600m for the payment protection insurance scandal in the first half of the year, taking its total bill so far to pounds sterling 10.4bn.
The giant bill for wrongdoing also included this week's pounds sterling 218m fine from UK and US regulators for rigging Libor interest rates, a pounds sterling 50m provision for mis-selling interest rate swaps to businesses, and pounds sterling 225m it was forced to set aside for further 'legacy issues'.
Some pounds sterling 150m of the pounds sterling 225m bill was linked to its pounds sterling 28m fine last year by the Financial Conduct Authority for promoting a high-pressure sales culture at the bank.
Lloyds was ordered to trawl through past sales and pay compensation to customers mis-sold investments. The bank also made a pounds sterling 100m provision to cover the cost of new rules capping annual charges on company pensions.
This has forced Scottish Widows, the insurance arm of Lloyds, to cut charges on many of its old pensions contracts. But this was more than offset by a pounds sterling 710m credit from slashing benefits in Lloyds' own final salary pension scheme.
The long list of misconduct charges overshadowed progress made elsewhere in the bank, with profits falling from pounds sterling 2.1bn to pounds sterling 863m. But this included a pounds sterling 1.1bn bill for paying investors to forfeit high interest bonds issued to help support Lloyds during the financial crisis. The bank said it expected its profits to rise in the second half as it revealed that its 'core tier one capital ratio' – a key measure of financial strength – increased from 10.3pc to 11.1 pc.
Lloyds will apply to the Bank of England'sPrudential Regulation Authority for permission to resume dividends next year, ending a six-year drought that started when it received a pounds sterling 20bn bailout from taxpayers in 2008.
Chief executive Antonio Horta-Osorio said: 'We're in a better position than we thought we would be at this stage, both in terms of profits and loss and capital position. This strengthens our position in our discussions with regulators – no doubt.'
This will be music to the ears of investors around the country.
The bank, still 25pc owned by taxpayers, is the most widely held stock in the UK with 2.7m shareholders, about 95pc of which are retail investors.
The government hopes to sell the remainder of its stake in Lloyds before the General Election next May, which analysts believe will provide another fillip for the bank as it is set free from the shackles of state interference.
Stripping out the huge bills for mis-selling, Lloyds continues to make good progress, with underlying profits jumping 32pc to pounds sterling 3.8bn in the first half of the year.
The bank (down 2.8pc, or 2.16p, to 74.25p) has been buoyed by the economic recovery, meaning less of its customers are defaulting on their loans and mortgage repayments.
Losses from bad loans more than halved from pounds sterling 1.8bn in the first half of last year to pounds sterling 758m.
÷?New British bank TSB (up 1.4pc to 286p) said profits in the first six months of the year fell to pounds sterling 78.6m.
This represented a 17pc fall from the second half of last year. The UK's seventh-biggest lender said the drop was due to a jump in costs since it was spun out of Lloyds last month and floated on the stockmarket.
Santander UK said profits rose to pounds sterling 325m in the second quarter, up 4.6pc on the same period a year ago. Chief executive Ana Botin said plans to float the lender on the stockmarket are 'not on the table this year'.
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