Lloyds Lowers PPI Costs But Impairments Rise -- Earnings Review

   By Adam Clark 
 

Lloyds Banking Group PLC (LLOY.LN) reported first-quarter earnings on Wednesday. Shares were down 2% in the afternoon. Here's what we watched:

PROFIT: Lloyds reported underlying profit of 2.00 billion pounds ($2.79 billion), slightly behind forecasts from UBS predicting $2.08 billion.

After restructuring charges, provisions for payment protection insurance claims and other items, pretax profit came to GBP1.60 billion, up from GBP1.30 billion the prior year.

REVENUE: Lloyds had total income for the quarter of GBP4.58 billion, beating a UBS forecast of GBP4.51 billion.

PPI: Lloyds booked a further GBP90 million provision for claims over mis-sold payment protection insurance, down from GBP350 million the prior quarter. Hargreaves Lansdown said Lloyds will be a key beneficiary of lower PPI claims as the August 2019 deadline looms, having already spent nearly GBP19 billion on the long-running scandal, but said the lender may still book further costs.

PROFIT GAP: Lower PPI charges helped Lloyds partly narrow the gap between its underlying and post-tax profit for the quarter, at GBP2 billion and GBP1.14 billion respectively. The prior year, underlying profit of GBP2.08 billion contrasted with a net profit of GBP890 million. However, restructuring, volatility and impairment costs continued to weigh.

IMPAIRMENTS: Lloyds booked GBP258 million in impairment costs for the period, more than double the amount recorded a year earlier. Yet the lender said that it hasn't seen any deterioration in asset quality, and that the U.K. economy continues to be resilient.

Davy said it takes a "more cautious" view of the bank's asset quality, modeling total charges of 35 basis points for the full year, against Lloyds's forecast of less than 30 basis points.

Write to Adam Clark at [e-mail]; @AdamDowJones

(END) Dow Jones Newswires

April 25, 2018 09:31 ET (13:31 GMT)

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