Lloyds Q1 Profit Drops On TSB Sale Charge, Stock Up As Underlying Earnings Rise

(RTTNews) - British lender Lloyds Banking Group Plc. (LYG, LLOY.L) Friday reported a lower pre-tax profit for the first quarter, hit by a charge related to the sale of its stake in TSB Banking Group Plc (TSB.L). Underlying earnings improved, supported by continued improvement in financial strength. The stock added 3 percent in early trade.

António Horta-Osório, CEO, said, "We have made a strong start to the next phase of our strategy to become the best bank for customers and shareholders, as we continue to support and benefit from UK economic growth. I am pleased with the continued improvement in financial strength and performance in the first quarter and expect our plan to deliver sustainable growth and improved returns."

Profit before tax fell to 1.214 billion pounds from 1.369 billion pounds in the previous year.

In March, Lloyds agreed to sell its 9.99 percent interest in TSB to Banco de Sabadell SA, a Spain-based financial institution. Loyds entered into an irrevocable undertaking to accept the offer in respect of its entire remaining 40.01 percent shareholding in TSB.

The lender said today that it incurred a loss relating to the TSB sale of 660 million pounds. The company's profit before tax and the sale of TSB increased 37 percent to 1.874 billion pounds.

Attributable profit dropped to 913 million pounds from 1.148 billion pounds.

Underlying profit jumped 21 percent to 2.178 billion, driven by an improvement in income and lower impairments.

Total income, net of insurance claims, slipped to 4.543 billion pounds from 4.629 billion pounds reported last year, while total income rose 3 percent to 4.644 billion pounds.

Net interest income rose 7 percent to 3.021 billion pounds, primarily driven by margin improvement.

Other income dropped 6 percent to 1.623 billion pounds, due to business disposals in 2014 and lower Retail fees and commissions.

In the first quarter, impairment charge was reduced 59 percent to 177 million pounds, while asset quality ratio improved 20 basis points to 0.15 percent.

Looking ahead, the company now expects net interest margin for the year to exceed original guidance of around 2.55 percent.

Full year asset quality ratio is now expected to be around 25 basis points which was previously expected to be around 30 basis points.

The stock added 3 percent in early trade to 79.69 pence.