Lloyds Banking Profit Plummets on PPI Provisions -- Update
October 26 2016 - 4:14AM
Dow Jones News
By Max Colchester
LONDON-- Lloyds Banking Group PLC said that profits sank in the
third quarter after the bank put aside more cash to compensate
customers who were sold insurance products they didn't need.
The U.K.'s biggest retail bank said that the Brexit vote in June
had so far had only a muted impact on the British economy.
Executives left Lloyds's dividend outlook unchanged even though
aftertax profit fell 68% to GBP219 million ($266.4 million) in the
three months to end-September from the same period last year. The
bank booked a GBP1 billion provision to compensate customers who
were sold Payment Protection Insurance. The news sent Lloyds shares
down 2.5% in early trading.
The funds set aside for compensating customers is "the last big
PPI provision that we expect to take," said Lloyds Chief Financial
Officer George Culmer.
U.K. regulators have proposed to cap the compensation for
Payment Protection Insurance in 2019, later than Lloyds
thought.
The bank said third-quarter revenue rose 1% to GBP4.28
billion.
The vote to leave the EU has so far had not resulted in
"significant changes" in consumer behavior, said Lloyds Chief
Executive António Horta-Osório.
Some business have deferred investment plans but "overall it is
too early to assess any longer-term trends," Mr. Horta-Osorio
said.
Lloyds's CEO urged the British government to borrow funds and
launch a wide-scale infrastructure investment program to ensure the
economy rides out the existing uncertainty after the country's vote
to leave the European Union.
Faced with low interest rates, the bank continued to cut costs.
""There is more to come," said Mr. Culmer. The bank is also
continuing to pull out of buy to let mortgages and the London
housing market amid cooling house prices.
The U.K. government announced earlier this month that it would
restart the privatization of Lloyds by drip selling its 9.1% stake
into the market.
Mr. Horta-Osorio sought to allay speculation that he would soon
quit the bank to look for another job as the government's sell down
nears completion. "I am very happy aye Lloyds, I like the bank...I
like our teams here," he said.
Write to Max Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
October 26, 2016 03:59 ET (07:59 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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