Lloyds sees its recovery start to slow

LLOYDS Banking Group shares yesterday lost more momentum after a muted third-quarter interim statement which indicated that the group’s progress towards its objectives has slowed compared to the first half of the year.

In an update notably thin on numerical detail, Lloyds said it delivered “good underlying income growth…[and] lower costs through continued strong integration delivery”. The group’s banking net interest margin, a key driver of its recovery, is expected to rise only “modestly” over the second half, Lloyds said, adding that it remains on track to deliver £1.3bn of cost savings from the integration of HBOS by the year end.

Although impairments continued to decline over the third quarter, Lloyds said lower impairments in the wholesale division had been offset by higher charges in the wealth and international businesses – where continuing high levels of bad debts in the Irish business were compounded by weakness in Australia.

Charles Stanley analyst Nic Clarke said: “We remain concerned about the negative impact that Ireland is having and despite good progress this year we believe the market still frets about the significant amount of wholesale funding that matures in the next couple of years and the potential impact that a weakening UK economy would have on Llloyds given its significant exposure to UK retail and commercial customers.”

But Lloyds also issued positive guidance on its funding position, having hit its target of £25bn of full-year public term issuance by the end of September. The group issued a further £2.5bn in October, allowing it to accelerate repayment of its central bank funding facilities.

Lloyds shares fell 3.18 per cent over the day to close at 67.39p.

ODDS ON | THE CONTENDERS TO REPLACE ERIC DANIELS

RICHARD MEDDINGS
FINANCE DIRECTOR AT STANDARD CHARTERED

IN THE next few weeks, Lloyds is set to hold a “beauty parade” of headhunters clamouring to be the ones appointed to sniff out a worthy successor to chief executive Eric Daniels.

In the month or so since Daniels tendered his resignation, several of the contenders originally mooted for the post have found other positions – notably Naguib Kheraj, the ex-boss of JP Morgan Cazenove, who has joined Lazard; and HSBC’s finance director Douglas Flint and investment banking head Stuart Gulliver, who, of course, are stepping up to become chairman and chief executive of the bank.

That leaves the field a little more open for the rest, of which Standard Chartered finance director Richard Meddings is quickly becoming a firm favourite among punters (with odds of 7/4 quoted by Cantor Index).

Nationwide chief executive Graham Beale, Royal Bank of Canada chief executive Gordon Nixon, former Barclays domestic banking head Fritz Seegers and Gail Kelly, chief executive of Westpac, are also favoured as outsiders, while Helen Weir, Lloyds’ executive director for retail, is regarded as the strongest candidate internally.