Lloyds Banking Group slumps to £2.3 bn loss

4th August 2011, Comments 0 comments

Britain's state-rescued Lloyds Banking Group on Thursday reported a first-half net loss of £2.3 billion (2.6 billion euros, $3.8 billion) after being forced to compensate clients who were mis-sold insurance.

LBG, which last month axed 15,000 jobs as it bids to halve its international division, said its loss after tax for the six months to June compared with a net profit of £596 million in the first half of 2010.

Pre-tax profits excluding exceptional charges slid 31 percent to £1.1 billion but beat analyst expectations for profit of £1.0 billion, according to Dow Jones Newswires.

"The group performed in line with our expectations in the first half of 2011 despite the ongoing challenges of economic and regulatory uncertainty, the effects of which ... are reflected in these results," LBG's recently-appointed chief executive Antonio Horta-Osorio said in a statement.

LBG, 41-percent owned by the British government, was mainly hit by a one-off charge of £3.2 billion which it aside to compensate customers mis-sold payment protection insurance by the bank.

British banks in April lost a high court appeal against tighter regulation of PPI which provides insurance for consumers should they fail to meet repayments on a credit product such as personal loans, mortgages or credit cards.

PPI became controversial after it was revealed that numerous consumers had been sold the insurance without understanding that the cost was being added to their loan repayments.

Britain's Competition Commission has since banned simultaneous sales of PPI and credit products.

Horta-Osorio, who has led LBG since March, last month unveiled plans to save the bank £1.5 billion a year, aided by the scrapping of 15,000 jobs, or 14 percent of its staff.

"We don't see that figure changing," he told a conference call with reporters on Thursday.

LBG has slashed more than 40,000 posts since 2009 as it looks to nurse its way back to health after its part-nationalisation at the height of the global financial crisis.

The lender, which was sunk by the ill-fated 2008 takeover of rival bank HBOS, is also cutting its international activities to 15 nations by 2014, compared with the current level of 30.

Horta-Osorio's predecessor Eric Daniels left LBG amid intense shareholder anger after he oversaw the government-brokered takeover of HBOS. Horta-Osorio formerly led Santander UK, the British arm of the Spanish banking group.

© 2011 AFP

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