By Max Colchester
LONDON-- Lloyds Banking Group PLC said Friday its net profit
narrowed in the first three months of the year, despite impairments
falling and margins increasing.
The part U.K. government-owned bank said total income, net of
insurance claims, was down 2% to GBP4.5 billion, from the same
period a year before. Net profit decreased to GBP913 million ($1.4
billion) from GBP1.1 billion in the same quarter last year, as the
bank took a hit on the spinoff of one of its units.
The retail focused bank has benefited from a resurgent economy
which reduced bad loans and fueled demand for mortgages. The bank
said it was raising its net interest income target--the difference
between its cost of borrowing and the price it lends at--above its
original target of 2.55%. Impairments fell 59% quarter on
quarter.
Lloyds Chief Executive António Horta-Osório said he expected the
U.K. economy to continue to grow this year despite an impending
general election. "I don't think the election will change these
trends anytime soon," he said on a call with reporters.
Lloyds incurred a GBP660 million loss in relation to the spin
out of its TSB Banking Group PLC unit. TSB was created after Lloyds
was ordered by European authorities to sell 631 branches to boost
competition following its government bailout during the financial
crisis.
In March Spain's Banco de Sabadell SA entered into talks with
U.K. lender TSB about a possible GBP1.7 billion ($2.54 billion)
takeover. As part of the spin off Lloyds pledge to pay TSB a lump
sum to cover information technology costs in the event of it being
bought.
In February regulators gave the bank the all clear to start
paying its first dividend since its bailout in the financial
crisis. The bank reiterated its plan to pay an interim and final
dividend in 2015, but executives declined to comment on whether
there would be any bumper handouts to shareholders. In the first
quarter Lloyds didn't have to take a provision to cover the
wrongful sale of insurance products to customers. However, the
bank's chief financial officer declined to rule out whether more
provisions would be made in the coming year.
The U.K. government, which currently owns just under a 21% in
the bank, has been whittling down its interest in the lender over
the past few months.
On Friday the bank said underlying profit, which strips out a
number of costs, was up 21% on last year to GBP2.2 billion
Write to Max Colchester at max.colchester@wsj.com
Access Investor Kit for Banco de Sabadell SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=ES0113860A34
Access Investor Kit for Lloyds Banking Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB0008706128
Access Investor Kit for Lloyds Banking Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US5394391099
Subscribe to WSJ: http://online.wsj.com?mod=djnwires