(Adds CEO, investor comment)
* Q1 pretax profit falls to 74 million pounds
* Bank abandons 2020 guidance
* 406 million pound tax credit lifts results
* Shares tumble in early trading
By Iain Withers and Sinead Cruise
LONDON, April 30 (Reuters) - Lloyds Banking Group's
pretax profit was all but wiped out in the first quarter, after
it joined the list of lenders hobbled by provisions against
expected bad loans due to the coronavirus pandemic.
Britain's biggest domestic bank on Thursday reported pre-tax
profits of 74 million pounds, down from 1.6 billion pounds the
previous year, hit by a 1.4 billion pounds ($1.75 billion) loan
impairments charge.
The figure was sharply below the 863 million pounds average
of analysts' forecasts compiled by the bank, sending shares as
much as 6% lower in early trading. Shares were down 2.8% at 0846
GMT, compared with a 0.1% fall in the FTSE 100.
Lloyds is viewed as a bellwether for the British economy, as
the country's largest provider of home loans and one of its
biggest backers of businesses.
"Despite the outlook remaining challenging and uncertain, we
are well placed to play our part and help Britain recover from
this crisis," Chief Executive Antonio Horta-Osorio told
reporters.
But Lloyds warned it expected to be hit by further
impairments, particularly if the UK economy shrinks by more than
its base case of 5%. The Office for Budget Responsibility,
Britain's official forecaster, has pencilled in a 13% decline in
2020.
The bank also abandoned forecasts on various performance
metrics it set out in February, which included an increase its
return on equity to 12 to 13%, saying that guidance was no
longer appropriate given the harsher environment.
Lloyds' results would have been even worse but for a tax
credit of 406 million pounds in the period, which the bank said
was due to lower profits and an uplift from deferred tax assets.
Like other lenders, Lloyds scrapped its proposed 2019
dividend payout earlier this month at the behest of Britain's
top financial regulator.
It said its board will decide on any future distributions at
year-end 2020.
"Despite there being no income for investors in the
immediate future, the bank is on an undemanding valuation and
its likely ability to weather a crisis such as this provides
some longer term comfort," said Richard Hunter, Head of Markets
at Interactive Investor.
CORONAVIRUS SUPPORT
Britain's banks have faced heavy criticism for their slow
progress in supplying 330 billion pounds' worth of
state-guaranteed loans to businesses buckling under the pressure
of a near-shutdown in the UK economy.
Lloyds said it had provided 880,000 loan repayment holidays
across all its product lines and issued 3,752 loans with an
aggregated value of 500 million pounds via the Coronavirus
Business Interruption Loan Scheme (CBILS).
But it is still lagging behind rivals RBS, HSBC
and Barclays, despite being Britain's biggest
provider of loans to small companies.
Lloyds has a 24% market share of relationships with small
business borrowers, data from business insights provider RFi
Group sent to Reuters shows.
Rival RBS, with a 14% share, has provided 1.4 billion pounds
of CBILS loans, nearly three times the value of Lloyds.
Horta-Osorio said the bank was stepping up its support for
businesses, but said companies preferred repayment holidays to
taking on CBILS debt, by a ratio of 10:1.
"You have to give customers what they want," he said, adding
that the launch of a lending scheme offering loans that are 100%
guaranteed by the government would help plug a gap in support
for small firms.
Lloyds reported a 2.7 billion pound increase in loans and
advances to 443.1 billion pounds over the period, which it said
was driven by drawdowns of existing corporate debt facilities.
HSBC and Barclays have also set aside billions of pounds to
cover an expected spike in bad loans due to the coronavirus
outbreak, with state-backed RBS expected to follow suit on
Friday.
($1 = 0.8013 pounds)
(Additional reporting by Lawrence White. Editing by Jane
Merriman)
HSBC Holdings (HSBA)
Barclays (BARC)
Lloyds (LLOY)
