* H1 pretax profit 3.9 billion pounds
* Bank buys wealth platform Embark
* Dividend restored as bad loan fears recede
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By Iain Withers and Lawrence White
LONDON, July 29 (Reuters) - Lloyds Banking Group
swung to a first-half profit on Thursday and announced an
interim dividend, boosted by a house-buying frenzy and improved
economic outlook in Britain.
The positive update from the bellwether mortgage lender came
after rival Barclays also posted upbeat earnings on
Wednesday, and showed how banks' profits are recovering as fears
of pandemic-related bad loans ebb.
Lloyds posted pretax profit of 3.9 billion pounds ($5.4
billion) for the six months to June, ahead of the 3.1 billion
pound average of analyst forecasts compiled by the bank.
The bank had posted a first-half loss of 602 million pounds
the previous year, after setting aside billions to cover
potential bad loans linked to the COVID-19 pandemic.
Lloyds also announced a 0.67 pence interim dividend, a day
after Barclays unveiled more than $1 billion worth of
shareholder payouts.
Lloyds shares rose 1.5% in early trading on Thursday,
against a 0.3% gain in the benchmark FTSE index.
The bank confirmed the acquisition of digital savings and
retirement group Embark, adding 410,000 customers and 35 billion
pounds of assets.
Like rivals, Lloyds is looking to expand in wealth
management on the basis of a pandemic-driven savings boom, to
make up for squeezed margins from record low Bank of England
rates.
"Lloyds is banking on headlines of its biggest acquisition
since going private in 2017 to glaze over a 33% decline in net
interest income," said Gemma Boothroyd, analyst at investment
platform Freetrade.
Bank profits in Britain are under pressure from low returns
on lending, as well as changing customer behaviour brought on by
the pandemic.
Lloyds said lending increased by 7.5 billion pounds in the
first half as the economy began to open up during the period,
but was again outstripped by growth in deposits - up 23.7
billion pounds as customers continued to build up savings.
INCREASING PAY
Lloyds released 656 million pounds of its bad loan
provisions, after upgrading its economic forecasts following a
rapid rollout of COVID-19 vaccines in Britain.
The bank said it had 1.4 billion pounds extra set aside for
potential defaults compared to before the pandemic.
"[We have] some allowance for uncertainties around the
vaccine rollout and vaccine mutation," interim CEO and finance
director William Chalmers told reporters. "Overall our economic
outlook is certainly an upgrade."
But its results were weighed down by 425 million pounds of
"remediation charges", including compensation for historic fraud
at its HBOS Reading branch and a previously disclosed fine for
misleading insurance customers.
The bank also said costs would be 100 million pounds higher
this year than it previously guided, as it increases bonuses for
staff after all-but cutting them last year.
Lloyds is in the midst of a shake-up of its top team after
long-standing boss Antonio Horta-Osorio left in April to become
chairman of Credit Suisse.
Chalmers is running the bank before HSBC veteran Charlie
Nunn takes the helm next month. Nunn and chairman Robin
Budenberg – who stepped into his role in January – are expected
to devise a refreshed strategy for the bank.
($1 = 0.7178 pounds)
(Reporting by Iain Withers and Lawrence White
Editing by Rachel Armstrong, Mark Potter and Barbara Lewis)
Barclays (BARC)
Lloyds (LLOY)