LONDON (Alliance News) - Lloyds Banking Group PLC Thursday said its first-half underlying profit increased by 32%, boosted by a significant reduction in impairment charges as the bank comes closer to the end of a three-year turnaround plan to return the itself to health following the upheaval of the financial crisis.
The bank plans to present a strategic update to the market in the autumn.
In a statement Thursday, Lloyds said that it made a GBP3.82 billion underlying profit in the six months ended June 30, compared with GBP2.90 billion in the corresponding period last year. Underlying income fell to GBP9.25 billion from GBP9.46 billion as an increase in net interest income was more than offset by lower other income. Costs were reduced to GBP4.68 billion from GBP4.75 billion, while impairment charges fell by 58% to GBP758.0 million.
Lloyds reiterated that it will apply the Bank of England's Prudential Regulation Authority in the second-half to restart dividend payments.
"In the first half of 2014, we continued to successfully execute our strategy, further enhancing our leading cost position and low cost of equity, by investing in the products and services our customers need and further strengthening and de-risking our balance sheet, reducing costs and increasing efficiency. As a result, we substantially improved our underlying financial performance and delivered a statutory profit, despite further charges for legacy issues," Chief Executive António Horta-Osório said in a statement.
Alongside the underlying figures, which exclude items such as the costs associated with spinning off TSB Banking Group PLC, and provisions for past conduct issues, Lloyds reported a 60% decline in statutory pretax profit to GBP863.0 million. The statutory result was hit by a further GBP600.0 million provision set aside for payment protection insurance mis-selling, taking the bank's overall provision for the scandal north of GBP10.4 billion.
The figures mark the end of an important first-half for the bank, which is still reeling from a blow to its reputation in the wake of Monday's GBP218.0 million in penalties paid to UK and US authorities over benchmark misconduct, which also played their part in the reduction in statutory pretax profit.
That sum included GBP70.0 million for attempts between April 2008 and September 2009 to manipulate the fees payable to the Bank of England for the firms? participation in the Special Liquidity Scheme, a taxpayer-backed government scheme designed to support UK banks during the financial crisis. The actions were recently described as "reprehensible" by the Governor Mark Carney.
The period also marked the float of 38.5% of Lloyds' ownership of TSB Banking, the revived network of branches which the bank must fully divest by the end of 2015 as a condition of the state aid it received in the wake of the financial crisis.
And the UK government's own holding in Lloyds was further whittled down in the first-half, with the sale of a 7.8% stake in late March taking the state's holding down to 24.9% after the sale of a 6% stake last September reducing it from a 38.7% starting point.
Lloyds shares were up 0.2% at 76.58 pence at the open Thursday.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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Lloyds (LLOY)