During the first six months of 2016, mortgage lending totalled £17.7bn at the group, a sharp drop from the £22.7bn lent in the second half of 2015, but up from the same period a year earlier when lending reached £16.1bn.
Mortgage lending at Lloyds has grown below market expectations in the past 12 months, as the group seeks to balance margin and risk considerations with volume growth. The group said its approach to lending meant it was well positioned should the UK face an economic slowdown.
In particular, Lloyds said lending to buy-to-let customers has grown significantly below the market, and in London the group has restricted the share of its mortgage flow through the use of loan-to-income caps.
Lloyds continues to drive the use of remote advice through video interviews across its mortgages, wealth and retail business banking divisions, with over 1,000 interviews taking place since the service was launched in March.
Of its broader strategy for the business going forward, Lloyds said: “Given the uncertainty, it is too early to determine the impact on our formal longer term guidance at this stage. However, while the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in future years than previously guided. We will formally update guidance when we have a clearer view of likely outcomes.”
Lloyds’ group chief executive António Horta-Osório, said the group was preparing for a reduction in growth as the impact of the EU referendum result played out over the coming months and years.
“The UK, however, enters this period of uncertainty from a position of strength, following continued private sector deleveraging, significantly improved mortgage affordability and low levels of unemployment,” he added.
“For Lloyds, our simple and low risk, UK focused, retail and commercial business model, together with the simplification and transformation of the business in recent years, position us well to continue doing the right thing for our customers and deliver strong returns for shareholders.”
The group is currently subject to an investigation carried out by the Financial Conduct Authority (FCA), in relation to arrears handling practices and the group’s recalculation of contractual monthly instalments. Lloyds said it was not able to make an assessment of the outcome of the ongoing review, but would respond “as appropriate” to any investigations, proceedings or regulatory action that may occur.
Excluding repossessions, the value of mortgages greater than three months in arrears fell to £5.8m at 30 June 2016, down from £5.9m six months earlier.
The group’s half yearly results showed that underlying profit reached £4.2bn in the first six months of 2016, down 5% on the second half of 2015. Total income also fell by 1% to £8.9bn.
As part of its continued cost-cutting drive Lloyds has also announced a further 200 branch closures and 3,000 job losses by the end of next year, as interest rates look set to stay at historic lows.
Lloyds’ cost-cutting drive, known as the ‘Simplification programme,’ will mean the intended number of staff reductions is increased from 9,000 to 12,000, with the timetable brought forward.
So far the programme has delivered £642m of annual run-rate savings to achieve its £1bn target by the end of 2017. However, this target has now been increased to £1.4bn, which Lloyds says is due to “changing customer behaviours and the expected lower for longer interest rate environment”.
Operating costs are now 3% lower at £4bn, which Lloyds said has been driven by the acceleration of its cost initiatives.
