Lloyds returns to profit

4 August 2010

Lloyds Banking Group has reported a return to profit for the first half of the year, beating forecasts in the process.

Pre-tax profit for the six months to the end of June came in at £1.6 billion, compared with loss of £4 billion in the same period last year, a turnaround which is largely due to a drop in the amount set aside to cover bad loans. This amount fell from £13.4 billion to £6.5 billion.

Total income at Lloyds rose by almost a third, to £12.5 billion.

The bank, which is 41% owned by UK taxpayers, had said it returned to profit earlier this year, but did not disclose figures until today.

Chief executive Eric Daniels said: "The group aims to deliver sustainable value through the cycle for our customers and shareholders. The principal element of the group's strategy remains the focus on building deep, long-lasting customer relationships in all its franchises.

"We continue to support this with a focus on driving down costs and maintaining effective capital management disciplines, within a strong, prudent risk management framework. Based on our economic outlook and the current regulatory context we would expect to see a smaller, more productive balance sheet and are expecting returns on equity of more than 15% over the medium to longer term."

The news has made analysts more optimistic about the potential for taxpayers to see a profit from their investment in the bank.

Lloyds is also likely to hit its gross lending targets, set by the government as part of its bail-out conditions.

In the first half of 2010, Lloyds extended £14.9 billion of gross new mortgage lending and £23.7 billion of committed gross lending to businesses, of which £5.7 billion was to small and medium businesses.

Shares in the bank have risen sharply in recent weeks, gaining on the back of last month's confirmation that the bank had passed the European Union's stress tests.

Lloyds' strong results followed HSBC's (HSBA) announcement on Monday that first-half profits had more than doubled to £7 billion. There was also a return to profit for Northern Rock's "bad bank".


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