Lloyds Banking Group has posted a £1.4bn pre-tax profit rise for 2014, while bad debt charges across personal loans, mortgages and current accounts fell 21 per cent to £600m.
The bank’s pre-tax profit reached £1.8bn, according to a full-year results statement for 2014, in a year that saw impairment losses fall significantly across all divisions.
Profits, however, were dented by another £2.2bn provision for claims about mis-sold payment protection insurance (PPI), plus another £925m hit for a series of fines from regulators throughout last year.
Lloyds has now set aside more than £12bn in total for PPI claims, with letters sent to 2.7 million customers about the product.
Chief executive António Horta-Osório, however, made a bullish statement on the bank’s progress.
He said: “2014 was a year of continued delivery for the group. This delivery has, in turn, enabled the UK government to make further progress in returning the group to full private ownership.
“In 2014 the UK government reduced its shareholding through the second successful sale of part of its stake in March and the launch of a pre-arranged trading plan in December which provides a means for an orderly sell down that will end no later than June 2015.”
A return to private ownership will be fuelled by the fact that, even after tax, Lloyds’ profits increased to £1.5bn compared to a £800m loss in 2013.
Crucially, the bank will make a dividend payment to shareholders for the first time since £20bn of taxpayers’ money was pumped into the company in 2008. A total of around £535m will be paid out to stock holders.
Chancellor George Osborne hailed the first dividend from Lloyds in six years as a “milestone”.
The results statement provides a full breakdown of impairment charges in the group’s secured and unsecured loans.
Bad debt losses on its secured loans increased from £280m in 2013 to £280m in 2014. But across its loans and overdrafts, this figure fell from £480m over the year to £280m. In credit cards, impairments were down from £275m to £190m.
Although the dividend and impairment improvements marked huge progress, the results also show the extent of fines dealt to the bank for malpractice such as manipulating foreign exchange rates and LIBOR.
The bank has even had to put aside another £430m in its retail, commercial banking and consumer finance divisions, for claims and redress regarding products sold through branches.
In terms of overall group lending, Lloyds now has £11.9bn of mortgages with 89,000 first-time buyers, as well as one in five of all types of residential mortgages. Its gross mortgage lending now stands at £40bn, with the bank being the largest participant in the government’s Help to Buy scheme.
In retail business banking, the group lent to 100,000 new business start-ups.
But Horta-Osório added: “We have significantly reduced risk in our lending business through careful portfolio management, the centralisation of the risk division and the implementation of tighter underwriting standards and controls.
“As a consequence, non-performing loans have reduced from over 10 per cent of lending balances in 2010 to less than three per cent in 2014.”
The chief executive explained that, during the same period, the group has slashed its non-core loan portfolio from £194bn.
By Marcel LeGouais