Lloyds makes first quarter profit of over £2bn as incomes increase

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Lloyds has released first quarter results for 2013 (release). The bank made a before tax profit of £2,040m, a rise from a pre-tax profit of £280m in the same quarter last year. The increase was driven by higher income, £394m of which came from sale of shares in wealth management company St. James's Place. Costs for PPI compensation claims also fell to £589m in the first quarter.

The bank said that it is now seeing signs of core lending returning to sustainable growth. A £5.7bn increase in customer deposits saw Lloyds' loan to deposit ratio increase by two percentage points, to 119 per cent. The core loan to deposit ratio rose to 100 per cent, an improvement of one percentage point.

Chief executive António Horta-Osório commented on the results:

We made substantial progress again in the first quarter. Underlying and statutory profits improved significantly, and our core loan book returned to growth earlier than expected. Margin increased, and costs and impairments continued to fall rapidly, with this progress underpinned by a further strengthening of our balance sheet.

The bank is part taxpayer owned, and there is some speculation that it could soon be put back into private hands. Our banking reporter Tim Wallace:

City A.M. understands a sale could come in the next 18 months, and analysts now expect the lender to pay dividends next year, a key milestone towards privatisation. The government owns a 39 per cent stake in the lender, which is due to update the market today.

The bank’s share price recently hit 56p, close to the 62p that the government needs if it wants to get its bailout money back on the sale.

Officials hope regulators will finalise the details of new capital rules in the coming months, giving investors clarity on the state of the banks. Combined with rising stock markets, a stabilising economy and an expected increase in Lloyds’ lending next year, City A.M. understands that this could lead to the bank being privatised before the end of 2014. Options for the sale include offering chunks to institutions, or taking more time to work up a full retail offering which could see widespread ownership.

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