Lloyds believes shake-up gives it lowest costs

Tim Wallace
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LLOYDS’ cost of equity should soon be the lowest in the industry, chief executive Antonio Horta Osorio claimed in a speech yesterday.

He argued the bank’s cost-cutting and its new focus on the UK mean it is set to become among the most efficient in the sector.

It came as the bank announced the sale of more overseas assets.

Lloyds is selling European commercial real estate loans to private equity firm Cerberus for £263m, the latest in a long line of sales designed to cut its presence abroad and raise funds for lending in the UK.

Non-core assets have fallen 30 per cent from £118bn in June 2012 to £83bn in June 2013, Horta Osorio told the Bank of America Merrill Lynch banking and insurance CEO conference in London yesterday.

He said the bank’s domestic focus, retail and commercial specialisation, cost-cutting, low financial leverage and non-core sales should give the bank a “unique competitive advantage” and the lowest cost of equity in the sector.

Customer deposits rose three per cent in the year to June, while loans stayed flat, giving the bank an improving loan to deposit ratio.

The rising cost of complying with regulation as well as fines and compensation bills as well as bad loans from the boom years have hit banks’ profitability since the financial crisis. But Lloyds has returned to profit this year and believes its turnaround is nearly complete.