Gloom lifting as Lloyds predicts return to profit

Mar 20 2010 by Iain Laing, The Journal

Although Lloyds said predictions of a return to the black were based on current expectations for the economy and regulatory burdens, the bank was pleased with its performance so far.

The bank, which has three million small shareholders, reported strong trading in the first 10 weeks of 2010 and has clamped down on costs after the HBOS merger.

In February’s annual results, it increased annual cost-saving targets to £2bn by the end of next year as a result of the takeover.

Bad debts in the second half of 2009 were around 20% lower than in the first six months of last year and Lloyds had previously guided a similar rate of improvement during 2010.

But the bank’s impairment charges are falling at a faster rate than expected, improving profitability.

The unexpected update will be a boost for chief executive Eric Daniels, who has defended the HBOS deal for more than a year to former Lloyds TSB shareholders who have seen dividends cut and the Government step in as a result of the takeover.

Mr Daniels waived a £2.3m bonus due for his 2009 performance to stave off another row over bank pay last month.

In November it carried out a £20bn-plus fundraising to strengthen finances and avoid a taxpayer-backed insurance scheme for bad debts, which would have seen the public stake rise further still.

European regulators have ordered Lloyds to sell around a fifth of its UK branch network, including the TSB brand and Cheltenham & Gloucester, in return for state support.