LLOYDS Banking Group said yesterday it had powered back to profit over the first half of the year, in what analysts dubbed “the most attractive turnaround story in the European banking sector”.
Lloyds raked in a pre-tax profit of £1.6bn over the six months to June, turning around a £3.96bn loss in the same period last year and far outstripping City expectations.
Key to the bank’s runaway success was a sharp fall in the amount it put aside to cover toxic loans. Impairment charges have fallen 38 per cent to £6.55bn since the end of 2009, and have more than halved since the first half last year, when they stood at a mammoth £13.4bn.
Lloyds, which previously said bad loan provisions would tumble just 21 per cent in the first half of this year, said it expected a “moderate” easing in impairments over the rest of 2010.
Chief executive Eric Daniels emphasised that the bank, which is 41 per cent owned by the taxpayer after it was bailed out at the apex of the crisis, is “playing its part” in supporting its customers and the UK economy by freeing up capital for lending. Lloyds said it had extended almost £15bn of gross new mortgage lending and £23.7bn of gross lending to businesses over the period, though net lending remained broadly flat – a result it pointed out was due to flagging demand from customers keen to reduce their indebtedness amid continuing economic uncertainty.
Daniels added that Lloyds’ EU-ordered divestment of 600 branches had been put on hold until the integration of HBOS is completed at the end of 2011.