Lloyds dumps assets to cut funding gap

LLOYDS continued to bear down on its funding gap in the third quarter of 2011, it revealed yesterday, despite posting a nine-month loss of £3.86bn.

Interim chief executive Tim Tookey insisted that it was “business as usual” at the beleaguered lender despite star CEO António Horta-Osório’s shock disappearance on sick leave last week due to “exhaustion”.

Tookey was forced to admit that some of the bank’s targets, like achieving a net interest margin of at least 2.15 per cent and a loan-to-deposit (LTD) ratio of 130 per cent by 2014 could be put off due to economic turmoil.

Its margins went backwards in the third quarter by four basis points, dropping to 2.05 per cent due to higher wholesale funding costs.

But investors were buoyed by the progress on improving the bank’s balance sheet: its current LTD ratio stands at 140 per cent – a four per cent decrease in the quarter and substantially below December’s 154 per cent.

Lloyds also managed to keep up its shrinkage of non-core assets: it ditched £11bn-worth in the third quarter, bringing the portfolio down to £151.4bn, down 22 per cent this year.

Contrary to some analysts’ expectations, it announced that its funding requirements for the rest of the year have been met after £5.4bn in bond issuance in the third quarter and an additional £3bn in October.

However, half of its £281.9bn wholesale funding will mature in the next year, with capital markets showing little sign of a sustained thaw.