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* Q1 pretax profit 1.9 bln stg vs forecast 1.1 bln
* Bank releases bad loan provisions on better outlook
* CEO Horta-Osorio leaving for Credit Suisse
(Adds details, CEO comments, share reaction)
By Iain Withers and Lawrence White
LONDON, April 28 (Reuters) - Lloyds Banking Group
smashed quarterly profit forecasts and freed up some cash set
aside to cover bad loans, ending CEO António Horta-Osório's
decade in charge on a high as Britain's pandemic-hit economy
shows signs of recovery.
Britain's biggest domestic lender said on Wednesday it made
1.9 billion pounds ($2.64 billion) of pretax profit in the first
three months of the year, comfortably ahead of analysts'
forecasts and the 74 million pounds reported a year earlier.
The results showed further signs of how government measures
such as job support schemes have pushed back economic pain from
the pandemic, with banks' loan books still holding firm.
"We have started to see positive signs in the UK, including
stronger economic data, and the successful progress of the
vaccine rollout," Horta-Osório told reporters after his final
earnings report at Lloyds.
The bank's profits were boosted by the release of 459
million pounds that had been set aside for expected bad loans.
It had been forecast to book more charges to cover soured debts.
Lloyds' pandemic provisions to date still stand at over 3
billion pounds.
Banks across Europe including HSBC, Deutsche Bank
and Santander have reported better than
expected earnings this week, despite ongoing concerns about
further COVID-19 waves.
Like HSBC, Lloyds said the economic outlook in Britain now
looked better than it had initially feared, leading to the
provisions release and improved guidance for the year.
Lloyds said return on tangible equity was now expected to be
8-10% this year, while net interest margin would be above 2.45%.
Costs would be trimmed below 7.5 billion pounds, it said.
The forecasts had previously been 5-7%, 2.4% and at 7.5
billion pounds, respectively.
Lloyds shares rose 5% in early trading.
TOUGH GIG
Horta-Osório is leaving Lloyds to become chairman of
crisis-hit Swiss bank Credit Suisse, with his
appointment expected to be confirmed at an investor meeting on
Friday. HSBC executive Charlie Nunn is set to join Lloyds as CEO
in August.
The Credit Suisse job is seen as one of the toughest in
banking. The Swiss lender is reeling from multibillion-dollar
losses from the collapse of family office Archegos, the fallout
from insolvent UK finance firm Greensill and a spying scandal
last year that ousted its former CEO Tidjane Thiam.
Horta-Osório declined to comment on his plans for Credit
Suisse.
The Portuguese-born banker is credited with turning round
Lloyds' fortunes after its bailout in the 2007-09 financial
crisis, including fully returning the lender to private hands in
2017.
He told reporters the highlight of his time in charge was
telling his team the bank had been fully privatised, while the
lowest point was the stress of the early days when the bank was
close to collapsing.
Horta-Osório has won plaudits for raising the profile of
mental health in workplaces, after speaking out about his
experiences of being signed off work for two months in 2011 for
stress-induced insomnia and exhaustion.
But he also faced criticism from politicians for his high
pay and handling of the fallout from a major fraud at the
group's HBOS branch in Reading, central England.
Horta-Osorio said the UK banking system was better
capitalised than before the financial crisis and able to weather
the economic impact of the pandemic.
"It's a difficult economic scenario ... but the provisions
are already on our balance sheet. When you look at the UK
financial sector, and its main players, I can tell you frankly I
think they're in a very different position."
($1 = 0.7205 pounds)
(Reporting by Iain Withers and Lawrence White. Editing by Anna
Irrera and Mark Potter)
