£1.8bn PPI claims hit Lloyds Banking Group profits
PPI has again hit profits (pic: Terry Murden)
Compensation payouts for mis–sold payment protection insurance slashed Lloyds Banking Group’s third quarter statutory pre-profits to £50m from £1.8bn in same period last year.
The bank confirmed that it will take a further £1.8bn hit from PPI leaving profits for the three months to September lower than the forecast £163m.
Underlying profit for the three months to the end of September came in at £1.8bn against 2.07bn for the corresponding period in 2018.
Net interest margin fell to 2.88%, with the benefit of lower deposit costs, higher current account balances and a small benefit from aligning MBNA credit card terms to other brands across the group offset by continued pressure on asset margins.
Loans and advances to customers for the nine month trading period increased by £6.2bn to £447bn in the third quarter with growth in targeted segments, including the open mortgage book, SME and Motor Finance, offset by reductions in the closed mortgage book and Global Corporates and Financial Institutions.
The open mortgage book grew by £6.1bn, driven by the £3.7bn Tesco mortgage acquisition and £2.4bn of organic book growth as the group took advantage of market pricing in the third quarter and benefitted from a strong application pipeline.
Lloyds now expects its open mortgage book at the end of 2019, including the Tesco mortgage acquisition, to be ahead of the 2018 year-end balance.
The board continues to target a progressive and sustainable ordinary dividend and will consider the return of any surplus capital at the year end.
John Moore, senior investment manager at Brewin Dolphin, said: “PPI has reared its head again, this time delivering a £1.8 billion charge for Lloyds.
“Aside from that, the bank’s net interest margin remains healthier than many of its peers, albeit slightly down on earlier in the year.
“Overall, it’s another resilient set of results from Lloyds and its track record on cost-cutting has helped set the bank apart from many of its competitors.
” While there is no mention of it in today’s statement, Brexit uncertainty continues to cast a shadow over UK banking; but Lloyds looks well place to contend with the challenges it presents.”