Lloyds doubles profit but faces payouts for conduct breaches
A statement shows Lloyds Banking Group’s pre-tax profits increased to £1.3bn for Q1 2017, though it faces a £200m payout for conduct issues.
While statutory profit for the first three months of 2017 doubled compared to the same period last year, the group has made extra provisions for conduct and PPI payouts.
An interim management statement reveals the £200m conduct provision includes £100m of compensation costs for “economic losses, distress and inconvenience” caused to the victims of the HBOS Reading fraud. The remaining £100 million is for “retail conduct matters.”
Lloyds has also made an extra provision of £350m for payment protection insurance redress. This has been taken to reflect the impact of revised arrangements for ‘Plevin’ PPI cases. These cases include a requirement to proactively contact customers who have previously had their complaints defended. Lloyds said this is likely to “increase estimated volumes and redress.”
The statement also shows that losses on bad loans across the group fell 35 percent from the end of 2016 to £127m. Provisions as a percentage of impaired loans remained broadly stable at 43 percent.
In terms of group performance, the bank said it increased underlying profit in the first quarter. The UK government shareholding in the group is also now below two percent.
Group chief executive António Horta-Osório said: “The UK economy continues to benefit from low unemployment and reduced levels of indebtedness, and asset quality remains strong and is stable across the portfolio.
“As announced earlier this month, we are determined that the victims of are fairly, swiftly and appropriately compensated and we have set aside a provision of £100m in our first quarter results.”
He added: “We continue to make good progress against our strategic priorities of creating the best customer experience; becoming simpler and more efficient; and delivering sustainable growth; and we remain on track to deliver the group financial targets for 2017.”