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Lloyds underlying profits fall and mortgage balance sheet down

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  • 26/10/2016
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Lloyds underlying profits fall and mortgage balance sheet down
Lloyds Banking Group confirmed it is no longer hunting mortgage market share in a bid to protect margin in a low growth market, which led to a fall in mortgage balances, its results confirmed.

In the nine months to 30 September, the bank’s loans and advances balance sheet was 1% lower at £452bn against 31 December 2015, and its share price fell 3% at opening as it set aside a further £1bn to cover Payment Protection Insurance (PPI) costs and pay outs.

Council of Mortgage Lender figures suggested Lloyds, Santander and Barclays all lost mortgage market share last year to the mid-sized mortgage lenders like Virgin, Bank of Ireland, TSB and Metro Bank.

However, Lloyds continued to grow its UK consumer finance business and increased lending to SME and mid-market clients.

The group reports underlying profits of £6.1bn, down from a comparative £6.4bn in 2015. However, it reported a statutory profit before tax figure of £3.3bn, more than 50% higher than the previous year.

Lloyds announced a further round of 1,340 redundancies earlier this month among branch staff in a move which was roundly criticised by unions. This is part of an ongoing programme of 9,000 staff cuts announced by Osario in 2014.

Group chief executive, Antonio Horta-Osario said: “The hard work undertaken in the last five years to transform and simplify the business has allowed the UK government to sell most of its stake in the Group, returning £17bn including dividends on its original £20bn investment. We welcome the recent decision to recommence the sale of its shares.”

He said despite the economic uncertainty the strength of the recovery means the UK is ‘well-positioned.’

In a contentious move earlier this month, the government announced retail investors would be barred from accessing the next phase of Lloyds £3.6bn share sale due to ‘ongoing market volatility.’ The banking group’s shares will be marketed to institutional investors instead.

Helal Miah, investment research analyst at The Share Centre, said: “During the period, Lloyds also set aside a further £1bn for compensation for mis-selling payment protection insurance, which is likely to impact income investors, as it will limit the capital available to service dividends. We predicted that PPI claims would still be a drag while assets and the loan portfolio will still be written off.

“However, there are some positives to take away from this release. The net interest margin rose a little during the period, while Lloyds maintained full year net margin guidance of 2.7% despite the low level of interest rates. Furthermore, lending to small businesses is still active despite fears that Brexit could impact business confidence.”

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