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Lloyds FY12 Loss Narrows On Higher Trading Income, Lower Costs

Lloyds FY12 Loss Narrows On Higher Trading Income, Lower Costs
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3/1/2013 4:45 AM ET

Lloyds Banking Group Plc (LYG: Quote, LLOY.L) Friday reported a narrower loss for full year 2012, reflecting higher trading income, and a decline in costs and impairment charges. The British banking major said legacy issues, notably Payment Protection Insurance or PPI, resulted in the Group still reporting a loss at statutory level.

According to the company, it continues to address legacy issues and has made a further PPI provision of 1.5 billion pounds in the fourth quarter, which brings the provision in 2012 to 3.58 billion pounds and the total amount provided to 6.78 billion pounds.

Impairment dropped to 5.15 billion pounds from 8.09 billion pounds in the preceding year. Core impairments reduced 34 percent to 1.92 billion pounds. The company posted 5 percent reduction in core costs to 9.21 billion pounds.

Looking ahead, the company stated that after a year of challenging economic conditions in 2012, it expects to see some economic growth in 2013. For the year, it expects net interest margin of around 1.98 percent and targets further reduction in total costs to nearly 9.8 billion pounds.

Lloyds also sees a further reduction of non-core assets of at least 20 billion pounds in 2013; on track to achieve target of a non-core asset portfolio of 70 billion pounds or less by the end of 2014, with over 50 percent in non-core retail assets.

António Horta-Osório, Group chief executive stated, "'The substantial progress we made in 2012 means that we are now ahead of our plan to transform the Group, and this was reflected in our stronger underlying financial performance in the year."

For the full year 2012, the bank posted statutory loss before tax of 570 million pounds, narrower than 3.54 billion pounds in the previous year. The results mainly reflected the PPI provisions and a 3.21 billion pounds of gains from sales of government securities.

Underlying profit before tax was 2.61 billion pounds, up about 2 billion pounds from last year, reflecting a significant reduction in losses in non-core business and stable profitability in core business.

On a per share basis, loss was 2.0 pence, compared to a loss of 4.1 pence per share a year earlier.

Underlying profit, on a management basis, jumped to 2.61 billion pounds, from last year's 638 million pounds. On the other hand, core underlying profit edged down to 6.15 billion pounds from 6.20 billion pounds a year earlier.

Net interest income dropped to 9.08 billion pounds from 12.7 billion pounds in the prior year. Total income climbed to 38.91 billion pounds from 26.84 billion pounds a year earlier. Net trading income was 13.55 billion pounds, compared to a trading loss of 368 million pounds last year.

Full year Group net interest margin was 1.93 per cent. Total Group funded assets as at December 31, 2012, decreased 9 percent to 535.3 billion pounds.

Customer deposits at the end of the year grew 4 percent to 422.5 billion pounds.

The bank's Core tier 1 capital ratio improved 1.2 percentage points to 12 percent. LLOY.L is currently trading at 52.45 pence, down 2.02 pence or 3.71 percent, on a volume of 99.12 million shares on the LSE.

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by RTT Staff Writer

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