Lloyds set to return to profit

19 March 2010

Lloyds Banking Group is set to return to profit in 2010, as write downs at its commercial and retail businesses drop back.

The group, which reported a £6.3 billion operating loss for 2009, says it "believes that it will be profitable on a combined businesses basis in 2010". Lloyds is gradually escaping from the drag of bad debts, which chief executive Eric Daniels claims reached a peak in the first half of 2009.

Its full-year results in February revealed that impairment charges soared 61% to £24 billion in 2009 following its forced marriage with HBOS and its disastrous commercial property portfolio.

However, these began to tail off in the second half of the year, reducing by 21% on the first six months, with further improvements expected this year and "substantial reductions" in 2011.

In an unexpected trading statement it said that impairment provisions are "currently trending at lower levels than anticipated".

Lloyds, which is 41% owned by the government, says its trading performance for the first 10 weeks of the year had been "strong".

"Costs have remained well controlled and are lower than the equivalent period in 2009," it adds in a statement to investor.

The bank has made big savings through integrating its information technology systems and cutting 10,000 jobs. Lloyds is looking to shave a further £2 billion off costs by the end of 2011.

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