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Lloyds Banking Group posts H1 loss of $3.8 billion after mis-selling charge, Irish writedown
LONDON (AP) ' Lloyds Banking Group PLC slid to a first-half loss on the back of a big charge related to the mis-selling of products to customers and to a writedown of Irish assets.
Taxpayer-backed Lloyds reported Thursday a net loss of 2.3 billion pounds ($3.8 billion) for the six months ending June 30 compared with a profit of 596 million pounds in the same period a year earlier.
The loss was largely expected following Lloyds move in May to take a 3.2 billion pound provision for repayments to customers who were missold payment protection insurance on mortgages and other loans. Lloyds maintained its guidance for the year too.
British banks, including Lloyds, could be forced to pay customers billions of pounds in compensation over the mis-selling of payment protection insurance that was supposed to cover the repayment of people's loans if they experienced a fall in income because of illness or job loss. The industry has been accused of mis-selling the policies on a wide scale, raking in profits as many customers were unaware they were even paying for them ' or could ever have claimed on the policies.
The ongoing debt crisis in Ireland also dented the bank's first half , with the company booking a 1.8 billion pound impairment charge on its assets there.
Chief Executive Antonio Horta-Osorio said the "ongoing challenges of economic and regulatory uncertainty" were reflected in these results.
The bank's shares slumped as much as 8 percent to recently trade down around 6.6 percent midday in London.
"The Irish impairments, payment protection insurance mess and higher costs all spell trouble for the bank," said Christopher Purdy, a sales trader at Spreadex. He said the drop in shares was "magnified" as investors digested the implications of the higher-than-expected impairments.
Lloyds Banking Group was created during the banking crisis through a hastily arranged rescue of Halifax/Bank of Scotland by Lloyds TSB. Toxic assets held by HBOS, particularly by mortgage specialist Halifax, forced the company to seek a government bailout and the taxpayer now owns around 41 percent of the bank.
Horta-Osario, who assumed the role of CEO in March, has taken drastic moves to shake up the company and put it back on the path to full private ownership.
As part of that strategy, the bank is planning to cut 15,000 more jobs, wind down some international operations and increase savings by 1.5 billion pounds ($2.5 billion) a year by 2014.
Lloyds, which is Britain's biggest mortgage lender, is also planning to sell around 600 branches to comply with European Union conditions for receiving state aid. It said it had received "a number of credible initial approaches" for the more than 600 branches it plans to sell and hopes to have a buyer by the end of the year.