Yahoo Finance FTSE 100: Lloyds raises dividends but sets aside £660m for bad loans
Lloyds (LLOY.L) Banking Group raised its dividend and said it had set aside £660m for bad loans, as it reported its half-year results on Wednesday.
The news came as it said its pre-tax profits had surged to £3.9bn ($5.03) in the six months to the end of June. In the same period last year the bank reported £3.1bn pre-tax profit.
The boost was driven by a boost in the bank’s income and a higher net interest margin – showing the difference between what it earns from loans and pays out for deposits.
It also updated its guidance for the year on the back of unexpected interest rate rises by the Bank of England.
As such, mortgage holders falling into arrears rose over the last quarter. This indicates borrowers struggling with higher repayments as inflation takes hold.
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Provisions for bad loans jumped amid the cost of living crisis. For the quarter they came in at £419m, ahead of the £371m estimated by analysts. The provision totals about £660m for the half.
"Overall, an increase of 10% to underlying profit and of 23% to pre-tax profit of £3.87bn are proof positive that Lloyds remains a tightly-run ship," said Richard Hunter, head of markets at interactive investor. "The balance sheet is clearly in rude health, and the bank announced an increase to the dividend which takes the projected yield to 5.5%. In terms of further financial returns, the previously announced £2bn share buyback programme is now 75% complete."
Stock dropped around 3% in early trade in London.
Lloyds is the first of the big City lenders to lenders to report results this week. As of Wednesday morning, the banks sector was up around 7% year to date, to rank it thirteenth out of the 39 industrial groupings which comprise the FTSE 350, according to data from AJ Bell.
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