Lloyds Q1 profits rise as CEO Horta-Osorio departs
Bank released £459m earmarked for potential Covid bad debts
Britain’s Lloyds Bank reported better than expected first quarter profits after releasing £459m set aside for potential Covid-related bad loans, reflecting an improved economic outlook, in the last set of results for outgoing chief executive António Horta-Osório.
The bank said pre-tax profits came in at £1.9bn compared with £74m a year ago and against analysts forecasts of £1.1bn. Results were helped by a net impairment credit of £323m in the quarter, as Lloyds released £459m previously set aside to deal with the coronavirus pandemic.
Lloyds last year set aside £1.4bn for bad debts in the first quarter of 2020 as the pandemic took hold and charged a total of £4.2bn last year, as it fretted about loan defaults.
Looking ahead, Lloyds said it expected a net interest margin above 2.45% for 2021, while return on tangible equity was now expected to be 8% - 10% this year and costs would be trimmed below £7.5bn.
Horta-Osório warned the pandemic "continues to have a significant impact on people, businesses and communities in the UK and around the world".
"While we are seeing positive signs, notably the progress of the vaccine rollout and the emergence from lockdown restrictions, the outlook remains uncertain,” he said.
Horta-Osório, who has been at Lloyds for 10 years, is leaving for troubled Swiss bank Credit Suisse, currently embroiled in the fallout of the Greensill Bank and Archegos Capital scandals. HSBC executive Charlie Nunn is set to join Lloyds as chief executive in August.
Hargreaves Lansdown analyst Nicholas Hyett said: "For shareholders, the big question is the dividend. Lloyds has built up a formidable capital position over last year and some of that is going to make it’s way back to shareholders through a new dividend policy to be announced at the half year."
"A commitment to a progressive policy, means the dividend is likely to be below 2019 levels, meaning the bank will be left with a still substantial capital pile even after resuming payments. It’ll be interesting to see what the bank does with that. Share buybacks, a special dividend, aggressive organic growth or even an acquisition are all possibilities.”"