Lloyds First Quarter Profits Plunge By 46%

State-backed Lloyds Banking Group (Other OTC: LLOBF - news) has posted a 46% fall in profits to £654m for the first quarter.

Lloyds saw a smaller drop in underlying profits - down 6% to £2.05bn - but its bottom line statutory pre-tax profit result was dragged lower partly by the £790m impact of redeeming a tranche of investor bonds known as "enhanced capital notes".

The high-interest loans had been launched during the financial crisis as the group sought to shore up its balance sheet.

Market and insurance volatility during the quarter and asset sales effects also took their toll, as well as restructuring costs. Together these knocked more than £500m off earnings. Shares (Berlin: DI6.BE - news) had fallen 1.6% by the close of trading.

Chief executive Antonio Horta-Osorio said the first quarter performance showed good progress and delivered a "robust financial performance", adding that Lloyds "continued to support and benefit from a resilient UK economy".

He added: "These results demonstrate the strength of our differentiated, simple, low risk business model and reflect our ability to actively respond to the challenging operating environment."

Lloyds took a £115m charge to cover "retail conduct matters" during the period but there was no further hit in the quarter from the Payment Protection Insurance (PPI) mis-selling scandal. It (Other OTC: ITGL - news) has made a total of £16bn in PPI provisions to date.

The Government still owns just under 9% of the group - whose businesses include Halifax and Bank of Scotland - after it stepped in to rescue it during the financial crisis.

Plans by ministers to sell the remaining shares were postponed earlier this year amid turbulence in financial markets.

In February, Lloyds posted a 7% fall in annual profits for 2015, to £1.6bn, after taking PPI charges totalling £4bn for the year. However underlying profits rose.

The group has been cutting costs and last week axed 625 jobs, part of plans first announced in 2014 for 9,000 job losses.

Its latest quarterly results come as global banks have been hit by tough conditions in financial markets. The start of 2016 saw volatile trading amid fears over the global economy, largely focused on China's growth slowdown.

First (Other OTC: FSTC - news) quarter results from Deutsche Bank (LSE: 0H7D.L - news) , released at the same time as those from Lloyds, showed a 58% fall in net profits to €236m (£184m), blamed on the turbulence.

A day earlier, Barclays (LSE: BARC.L - news) posted a 25% drop in profits to £793m.