3rd Feb 2014 08:51
LONDON (Alliance News) - Lloyds Banking Group PLC Monday said it expects to make a "small" pretax profit for the full year ended December 31, 2013, after booking a further GBP1.93 billion in PPI and interest-rate-hedging product provisions.
In a trading update ahead of the bank's full-year results due February 13, Lloyds said it expects to make a GBP6.2 billion underlying profit, which is ahead of the GBP5.84 billion analyst consensus forecast used by the bank. For 2012, Lloyds underlying profit was GBP2.61 billion.
Lloyds also its net interest margin improved to 2.12% in 2013 from 1.93% in 2012.
But the bank set aside new provisions of GBP1.8 billion for PPI and GBP130 million relating to the sale of interest-rate hedging products, the complex financial products which were widely mis-sold by high street banks to small-and-medium-sized businesses.
The new provisions bring the amount set aside for PPI in the last financial year to GBP3.05 billion just one week after competitor Royal Bank of Scotland Group PLC said it was setting aside a further GBP465 million to pay for PPI claims. Lloyds' overall provision for the PPI scandal, which now stands at GBP9.83 billion, overshadows the GBP3.1 billion total set aside by RBS.
Lloyds said the additional provision was made because it is now forecasting a "slower decline" in future claims than previously expected.
Lloyds, which is still 32.69% state-owned, also said it expects to apply to the Prudential Regulation Authority in the second half of the year to restart dividend payments, which is said will commence at a "modest level".
"The board expects thereafter to have a progressive dividend policy with the aim of moving, over the medium term, to a dividend payout ratio of at least 50% of sustainable earnings," Lloyds said in the statement Monday.
Lloyds said work has begun on documents that would allow for a possible future sale of shares to the public.
"Over the last three years, we have reshaped, simplified and strengthened the business to create a low-risk efficient Retail and Commercial bank that is focused on our customers and on helping Britain prosper," António Horta-Osório, chief executive, said in the statement.
"Our significant progress in delivering sustainable improvements in our capital position and our profitability, despite legacy issues, is testament to the strength of our business model and the commitment of our people, and has enabled the UK government to start to return the bank to full private ownership," Horta-Osório added.
In a separate statement, J Sainsbury PLC said its GBP248 million deal to buy up the remaining 50% stake in Sainsbury's Bank PLC from Lloyds was completed on Friday.
Lloyds shares were Monday quoted at 81.31 pence, down 1.99 pence, or 2.4%, in early morning trading. Sainsbury shares were up 1.10p at 346.00p, or 0.4%.
By Samuel Agini; [email protected]; @samuelagini
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