Lloyds Banking Group profit slumps 97 per cent after £1.8bn PPI hit
Lloyds Banking Group narrowly avoided tipping into the red this morning after taking a major third-quarter dent from the mis-selling of payment protection insurance (PPI).
The lender’s pre-tax profits were reduced to £50m, falling 97 per cent from the same period last year after setting aside £1.8bn for PPI provisions.
Read more: UK banking sector coughs up £40bn in taxes
Revenue tumbled six per cent year-on-year to £4.1bn.
Analysts had been expecting income of £4.3bn.
The firm posted statutory profit before tax of £2.9bn for the first nine months of 2019.
Jefferies analysts said that the PPI charge “casts a pall over otherwise respectable (not stellar) performance”.
The broker kept its “Buy” rating, saying that the “underlying credit picture is better than the prevailing consensus”.
Shares in the bank edged down just over one per cent in early morning trading.
António Horta-Osório, group chief executive at Lloyds, said: “I am disappointed that our statutory result was significantly impacted by the additional PPI charge in the third quarter, driven by an unprecedented level of PPI information requests received in August.
Read more: How did banks get their PPI sums so wrong?
“However, our performance continues to demonstrate the resilience of our customer franchise and business model, the strength of our balance sheet and that our strategy is the right one in this environment.”
Finance chief William Chalmers said this morning that he was seeing “less investment activity than we might otherwise see in a more stable environment”.
This week’s earnings seasons has underlined the scale of PPI costs facing the banking sector, with a number of Britain’s largest lenders setting aside billions of pounds to pay for a last-minute surge in claims before the deadline.
John Moore, senior investment manager at Brewin Dolphin, said: “”The bank’s net interest margin remains healthier than many of its peers, albeit slightly down on earlier in the year. Overall, it’s another resilient set of results from Lloyds and its track record on cost-cutting has helped set the bank apart from many of its competitors.
“While there is no mention of it in today’s statement, Brexit uncertainty continues to cast a shadow over UK banking; but Lloyds looks well place to contend with the challenges it presents.”
Richard Hunter, head of markets at interactive investor, added: “The shares have had the benefit of a “Brexit bounce” of late, rising 9 per cent in the last three months as perception switched to ruling out the likelihood of a no-deal Brexit.
“That particular cloud will not be lifted in the immediate future, and on balance the third quarter numbers were largely uninspiring.
“Given the ongoing reservations around prospects for the UK economy, the market consensus has been recently shaved, now coming in at a cautious buy as Lloyds continues to search for a way out of the doldrums.”