Moreover, and while the group's impairment charge fell by a quarter year-on-year to £8.09bn, Lloyds' property-focused Irish book remains troubled. The Irish impairment charge was cut 25 per cent but, at £3.19bn, it still represents 39 per cent of the total charge. Yet the Irish book accounts for just 2.6 per cent of the group's £566bn commercial loan book. That helped the wealth & international unit to report a heavy £3.94bn pre-tax loss.
Meanwhile, higher funding costs and muted credit demand amid tough economic conditions resulted in retail pre-tax profits sliding 9 per cent to £3.64bn. These factors, as well as asset disposals, also impacted the wholesale banking unit, which posted a 67 per cent fall in pre-tax profits to £828m.
Prior to these figures, Charles Stanley was forecasting underlying EPS of 3.5p for 2012.
| LLOYDS BANKING GROUP (LLOY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 36.16p | MARKET VALUE: | £24.9bn | |
| TOUCH: | 36.16-36.2p | 12-MONTH HIGH: | 66p | LOW: 21.7p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 67p | |||
| Year to 31 Dec | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2007 | 4.00 | 19.2 | 23.9 |
| 2008 | 0.76 | 4.5 | 7.6 |
| 2009 | 1.04 | 7.5 | nil |
| 2010 | 0.28 | -0.5 | nil |
| 2011 | -3.54 | -4.1 | nil |
| % change | - | - | - |
IC VIEW:
Lloyds' 10.8 per cent core tier-one capital ratio looks decent enough. But the bank, which is 41 per cent state-owned, is tackling weak economic conditions while absorbing rising funding costs. There's no dividend, either. So, even though the shares trade below the 58.6p tangible nets asset value, there's no obvious catalyst for a rerating. Hold.
Last IC view: Fairly priced, 33p, 5 October 2011
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