Lloyds posts £570m loss in 2012 as government ‘prepares to sell stake

Lloyds Banking Group reported a loss for the full year to December 2012, much lower than the heavy losses seen the previous year, as reports suggest the UK government is gearing up to sell its stake in the bank.

The 40% UK taxpayer owned bank posted a loss of £570m for 2012, down from £3.5bn in 2011. Lloyds blamed the cost of Payment Protection Insurance claims for the fall – it set aside £1.5bn to cover PPI in the fourth quarter alone.

Last week, Lloyds was fined £4.3m for delaying compensation payments to customers over PPI mis-selling. PPI mis-selling has already cost the bank more than £5bn.

The group posted underlying profit before tax of £2.6bn, up from £638m in 2011. This reflected a reduction in losses in Lloyds’ non-core business and stable profitability in the core business, it said.

Income fell by 13% to £18.4bn as a result of customer deleveraging and lower margins in the core business, and the substantial £42.3bn reduction in the non-core portfolio.

Due to market conditions and its own financial positions, the bank is not returning to the dividend register this year. Lloyds has not paid a dividend since before the 2008 financial crisis.

A report on Sky News suggests UK chancellor George Osborne will begin selling the government’s stake in the bank when its shares hit 61p. Yesterday Lloyds shares were trading at 54.67p each.

Meanwhile, AUM in subsidiary Scottish Widows Investment Partnership (SWIP) rose from £116.8bn to £118.5bn between 2011 and 2012.

Chief exeutive António Horta-Osório said: “While legacy issues, notably Payment Protection Insurance, resulted in the group still reporting a loss at the statutory level, our achievements resulted in a significant improvement in both group underlying and statutory performance, and continued strong returns, above our cost of equity, being delivered in our core business.”

Horta-Osorio has been awarded a bonus of £1.5m in deferred shares for 2012, to be released it 2018, while the bank’s total bonus pool has been cut 3% to £365m, the bank said.

 

This article was first published on Investment Week


 

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