31st Oct 2019 09:06
(Alliance News) - Lloyds Banking Group PLC on Thursday recorded a GBP1.80 billion payment protection insurance provision for the third quarter, wiping away almost all of the lender's profit.
Shares in the lender were down 1.5% in London in early trade at 56.78 pence each, one of the worst performers in the FTSE 100.
Separately, the bank announced a series of executive and board changes, including the retirement of its chief operating officer and chair.
Lloyds said Chief Operating Officer Juan Colombas will retire from the lender in July 2020. He joined Lloyds in 2011 as chief risk officer and has been on the board since 2013.
As COO, Colombas was in charge of the bank's GBP3 billion digital investment strategy.
Lloyds said Colombas was "critical" to the bank turning around its fortunes following the financial crisis, ensuring it was able to move forward with "secure foundations".
Lloyds also announced the appointment of Sarah Legg and Catherine Woods to the board.
Legg was rival HSBC Holdings PLC's financial controller until earlier this year, having previously served as chief financial officer for HSBC's Asia Pacific region. She is joining the board on December 1.
Woods will join the board on March 1. She has recently retired from the board of Irish lender AIB Group PLC as deputy chair and senior independent director.
They will be replacing Chair Norman Blackwell and Non-Executive Director Anita Frew.
Blackwell and Frew have served their nine years on the board so will be stepping down in May 2020 and this December, respectively. Lloyds will start a search for a new chair early next year.
Turning to the lender's quarterly results, in the three months to September 30, Lloyds saw almost all of its pretax profit wiped from the books, recording GBP50 million profit compared to GBP1.82 billion in the same period a year before.
For the quarter, Lloyds booked a GBP1.80 billion PPI provision. In September, the lender warned of a "significant increase" in PPI claims in the days leading up to the Financial Conduct Authority's deadline of August 29.
Before the PPI charge, the lender's underlying profit was down 12% year on year at GBP1.82 billion - as a result of lower income.
Net interest income slipped 2.2% to GBP3.13 billion from GBP3.20 billion the year before. Net income was 5.8% lower year on year at GBP4.19 billion. The lender blamed the drop in income on "continued pressure on asset margins".
Lloyds' banking net interest margin in the quarter worsened slightly to 2.88% from 2.89% three months prior and down from 2.93% the year before.
Operating costs were down 4.0% at GBP1.91 billion versus GBP1.99 billion the year before. As a result, the lender's cost-to-income ratio improved to 47.6% from 47.1% the year before.
Lloyds ended September 30 with a GBP447 billion loan book, 1.4% higher than the GBP441 billion recorded at the end of June but only slightly higher than the GBP444 billion seen at the beginning of 2019.
The lender's open mortgage book increased 2.3% in the three months to GBP271.0 billion with the closed mortgage book decreasing by 3.5% to GBP19.1 billion.
Customer deposits increased marginally over the same three month period to GBP419 billion.
The lender's CET1 ratio at the end of the quarter stood at 13.5% compared to 14.0% three months earlier. Lloyds' risk-weighted assets increased 1.0% over the quarter to GBP209 billion.
In the nine month period, Lloyds pretax profit is down 40% to GBP2.95 billion from GBP4.93 billion. Net interest income is 2.8% lower at GBP9.28 billion compared to GBP9.54 billion.
"In the first nine months of 2019 we have made strong strategic progress and delivered solid financial performance in a challenging external environment. I am disappointed that our statutory result was significantly impacted by the additional PPI charge in the third quarter, driven by an unprecedented level of PPI information requests received in August," said Chief Executive Antonio Horta-Osorio.
He continued: "However, our performance continues to demonstrate the resilience of our customer franchise and business model, the strength of our balance sheet and that our strategy is the right one in this environment."
Looking ahead, the lender is now guiding for its net interest margin to end 2019 at 2.88%, which is in line with previous guidance of about 2.90%.
Operating costs are now guided to be less than GBP7.9 billion, ahead of previous guidance, resulting in its cost-to-income ratio coming in lower than in 2018, when the lender recorded a ratio of 49.3%.
Horta-Osorio added: "We will maintain our prudent approach to growth and risk whilst continuing to focus on reducing costs and investing in the business to transform the group for success in a digital world. Although continued economic uncertainty could further impact the outlook, we remain well placed to support our customers and to continue to Help Britain Prosper."
By Paul McGowan; [email protected]
Copyright 2019 Alliance News Limited. All Rights Reserved.
Related Shares:
HSBC HoldingsAib Group