Anyone that owns a mobile phone knows how far the tentacles of the payment protection mis-selling claims industry can reach. Any evaluation of Lloyds Banking Group (LLOY) needs to take a position on whether its PPI costs can really be seen as "one-offs". That has to take into account not only the growth of the claims industry, but also the ongoing review by the Financial Conduct Authority, which could yet increase the amount of charges the banks have to swallow.
The bank booked a £1.4bn charge for PPI, and took on further costs of £665m during the period from its disposal of TSB. The size of the former surprised the market, but pre-tax profits grew nevertheless.
Strip out these charges that may or may not be exceptional and underlying profit was up 15 per cent at £4.3bn, driven by a boost in income, a reduction in impairments and flat costs. A growing UK economy and a strong showing from Scottish Widows - including its first foray into the bulk annuity market - brightened the outlook for Lloyds in the half. The improved revenue also helped to push its cost-to-income ratio down by 70 basis points to 48.3 per cent
Tier-one capital came in at 13.3 per cent of risk-weighted assets. That was higher than the 12.8 per cent clocked at the end of December, but below analysts' consensus expectation of 13.7 per cent.
Analysts at Investec Securities expect pre-tax profits of £4.85bn and EPS of 4.6p for the full year (from £1.76bn and 1.7p in 2014).
| LLOYDS BANKING GROUP (LLOY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 85.43p | MARKET VALUE: | £61bn | |
| TOUCH: | 85.4-85.43p | 12-MONTH HIGH: | 89p | LOW: 71p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 45 | |
| NET ASSET VALUE: | 59p | |||
| Half-year to 30 Jun | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2014 | 0.86 | 0.8 | nil |
| 2015 | 1.19 | 1.0 | 0.75 |
| % change | +38 | +25 | - |
Ex-div: 13 Aug Payment: 28 Sep | |||
