Despite setting sums aside for the cost of compensating customers for fraud in the HBOS Reading branch and for payment protection insurance mis-selling, Lloyds Bank (LON:LLOY) have seen profts for the first quarter of 2017 double.
According to the chief executive, Antonio Horta-Osorio, Lloyds “simple and low risk” business allowed it to cope in the difficult trading environment.
“In the first three months of this year we have delivered strong financial performance with increased underlying profit, a significant improvement in statutory profit and returns, and strong capital generation.
“These results continue to demonstrate the strength of our customer focused, simple and low risk business model and our ability to respond to a challenging operating environment.” he said.
For the months until March 31, pre-tax profits reached £1.3 billion from £654 million the year before.
The taxpayers stake in the bank has now fallen to belowe 2 percent from the initial 43 percent. Last week Phillip Hammond said that the government had reclaimed the £20 billion that was used to buy the bank in 2008.
Horta-Osório described this as a “source of pride” for Lloyd’s employees.
Regarding the HBOS Reading fraud, Horta-Osório confirmed the bank had put aside £100 million for compensation to those affected. Six people have been jailed after spending proceeds on superyachts and sex parties.
Another £350 million has been set aside to cover the cost of mis-sold PPI.
“Lloyds’ ability to generate capital, and its limited needs to retain much of that within the bank mean that it has great dividend potential. Sure enough, they have raised their guidance for capital generation which bodes well for the prospects for additional special dividends.” said Steve Clayton, manager of a Hargreaves Lansdown income fund.
Neil Wilson, an analyst at ETX Capital, said: “Lloyds’ resilience is based a lot on the continued health of the UK economy, but we must factor some downside risks, particularly around credit risks.”