Lloyds Banking Group loan impairments increase to £270m

Lloyds Banking Group, Britain’s largest mortgage lender, increased its quarterly impairments by almost a third.

Loan impairments rose to £270 million pounds (€301 million) in the three months ended September 30th from £204 million (€228.8 million) in the same period a year ago. Lloyds said there was a “single large corporate impairment” in the third quarter, without specifying details.

Lloyds has grown in riskier consumer finance with the acquisition of Bank of America’s MBNA UK credit card division for £1.9 billion (€2.1 billion) in December in an attempt to diversify the bank’s mortgage-dominated balance sheet. The bank also has the biggest exposure to consumer car finance among Britain’s banks, though it represents only about 3 per cent of its balance sheet.

The Bank of England will examine resilience to the consumer credit within its stress tests of banks this year as motor finance experiences growth that’s outpacing household incomes.

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The bank is preparing to outline a new strategy for growth in February, which analysts expect will involve further cost reductions and investment in technology after the bank eliminated thousands of jobs. The government sold its last remaining shares in the group in May some eight years after its bailout.

Profit doubled

But Lloyds, which has 97 per cent of its business in the UK, remains wedded to the fortunes of the economy as the government negotiates Brexit and edges toward its first interest-rate increase for a decade.

Pretax profit for the third quarter more than doubled to £1.95 billion (€2.19 billion). Excluding exceptional charges, Lloyds reported a pretax profit of £2.1 billion (€2.36 billion), in line with the average estimate of three analysts compiled by Bloomberg News.

Meanwhile, an ad campaign for wrongly-sold payment protection insurance that stars the Arnold Schwarzenegger's disembodied Terminator-era head has caused a spike in compensation claims, which could cost the bank £1.7 billion (€1.91 billion) in extra misconduct costs, according to an analyst at Morgan Stanley.

The commercial, commissioned by the UK’s Financial Conduct Authority, features an animatronic model of the former California governor’s head mounted on tank tracks chasing British shoppers, urging them to “make a decision – do it noooooow,” before the August 2019 deadline for claiming PPI compensation.

– (Bloomberg)