Lloyds Swings To Profit In First Half, Shares Climb

(RTTNews) - Lloyds Banking Group Plc (LYG, LLOY.L) Thursday reported a turnaround to profit in first half, as total income climbed with a sharp rise in trading income. The results also reflected a decline in costs and impairments. The shares are currently up about 8 percent in the morning trade on the London Stock Exchange.

For the period, Group net interest margin increased 8 basis points, costs were down 6 percent, and impairment charge dropped 43 percent from last year. The company said it still expects total costs to reduce to around 9.6 billion pounds in 2013 and to around 9.15 billion pounds in 2014.

Group Chief Executive António Horta-Osório said, "In the two years since we set out our strategic plan to become the best bank for customers, we have transformed the Group with increasing momentum, reshaping the business to focus on our core UK franchise, significantly reducing costs and risk, and simplifying and improving our service, products, and processes."

For the first half, the British banking major posted a profit before tax of 2.13 billion pounds, compared to a loss of 456 million pounds in the previous year.

Earnings per share were 2.2 pence, in comparison with a loss of 1.0 pence per share a year ago. The firm said it has restated its prior-year results to reflect implementation of IAS 19R and IFRS 10.

Underlying profit before tax for the period was 2.91 billion pounds, while it was 1.04 billion pounds a year earlier.

In the first half of 2013, Retail made significant progress and underlying profit increased 11 percent to 1.64 billion pounds, driven by a reduction in the impairment charge. Commercial Banking underlying profit improved 3 percent to 954 million pounds.

Group total income climbed to 22.07 billion pounds from 16.26 billion pounds last year. Net trading income was 11.02 billion pounds, sharply up from 4.55 billion pounds reported in 2012.

Meanwhile, net interest income declined to 3.27 billion pounds from 4.26 billion pounds in the preceding year. Core net interest income was 5.03 billion pounds, higher than 4.92 billion pounds last year.

The Group noted that its banking net interest margin increased to 2.01 percent, from 1.93 percent, which was ahead of guidance.

Total costs fell to 4.75 billion pounds from 5.05 billion pounds a year ago. Impairment charges for the period declined to 1.68 billion pounds from 2.73 billion pounds in the preceding year.

"These cost reductions have been achieved while delivering a substantial improvement in customer satisfaction and reduction in complaints, driven by faster, more automated and simpler processes, focused on the customer," Horta-Osório said.

Core tier 1 capital ratio as at June 30, 2013, was 13.7 percent, up from 12.0 percent as at December 31, 2012.

Looking ahead, the company now expects full year 2013 net interest margin of close to 2.10 percent, compared to its previous guidance of an improvement to around 1.98 percent.

LLOY.L is currently trading at 73.73 pence, up 7.68 percent, on a volume of 211.67 million shares on the LSE.