Lloyds reports Q1 profit boost as loan loss provisions released

Lloyds Banking Group has reported £1.9bn in pre-tax profit for the first quarter of 2021 after releasing £459m set aside for loan loss provisions.

This decision was based on improvements to the UK’s economic outlook, including the impact of the government’s furlough scheme being extended.

In the first quarter of 2020 Lloyds reported pre-tax profit of just £74m, with loan loss charges almost wiping out its earnings.

The banking group – which includes Lloyds Bank as well as Halifax, Bank of Scotland and Scottish Widows – took a £1.4bn charge at the start of the Covid-19 outbreak and over the course of the year it put aside a total of £4.2bn to cover the possibility of business and personal customers failing to keep up with their loan payments.

Lloyds said that the expected credit loss allowance of £6.2bn still set aside remains “high by historical standards”. It assumes that a large proportion of expected losses will emerge over the next 12 to 18 months as support measures end and unemployment increases.

“The coronavirus pandemic continues to have a significant impact on people, businesses and communities in the UK and around the world,” said outgoing chief executive António Horta-Osório.

“Whilst we are seeing positive signs, notably the progress of the vaccine roll-out and the emergence from lockdown restrictions, the outlook remains uncertain. The group remains absolutely focused on supporting its customers and helping Britain recover from the financial effects of the pandemic.”

Lloyds Banking Group told to change ‘bounce back’ loan terms

The Competition and Markets Authority (CMA) has criticised Lloyds Banking Group for forcing small business customers to open a business current account when taking out a Bounce Back Loan.

The group, which includes Lloyds Bank and the Bank of Scotland, has admitted that it did not comply with certain aspects of legal undertakings designed to protect customers from anti-competitive practices.

Launched by the UK Government, Bounce Back Loan Scheme is intended to help smaller businesses access finance more quickly during the coronavirus pandemic. Small and medium-sized firms can borrow between £2,000 and up to 25% of their turnover, with a maximum loan of £50,000 available under the scheme.

From 8 May 2020 onwards, Lloyds required around 30,000 customers that were running the finances of their business through a personal current account also to open a business current account with the bank in order to obtain a loan through the Bounce Back Loan Scheme.

The CMA noted that although Lloyds’ new business current account customers would not initially be charged, small business customers may keep their account open for longer than the fee-free period, resulting in charges for an account that may not be well suited to their business.

Working with the CMA, Lloyds has agreed to a number of actions which include writing to customers during September to inform them that:

if they opened a BCA with Lloyds, they are not required to maintain this account for the purposes of a loan under the Bounce Back Loan Scheme, and can choose to switch to another provider at any time while keeping the loan; and

they will be offered the option to switch to a fee-free loan servicing account.

Lloyds has also promised to ensure that any customer that retains the business current account will be reminded of these options two months before any new charges are introduced.

From the middle of September, customers making new applications for loans under the Bounce Back Loan Scheme will have an upfront choice to open either a business current account or a fee-free loan servicing account.

“The Bounce Back Loans Scheme is a key part of the support provided by Government to small businesses during the coronavirus (Covid-19) pandemic,” said Adam Land, senior director of Remedies Business and Financial Analysis at the CMA.

“It is important that signatories to our undertakings participating in this scheme do not restrict the choices of small businesses by bundling loans and business current accounts.

“By forcing businesses to open current accounts as a pre-condition to access this scheme, Lloyds breached the CMA undertakings it signed, reduced choice and put their customers at risk of being unnecessarily charged.”

Swiss private bank UBP acquires Lloyds’ international private banking arm for £100m

Swiss private bank Union Bancaire Privee UBP SA has agreed to take over UK Lloyds Banking Group plc’s (LON:LLOY) international private banking arm for up to GBP100m (USD151.7m/EUR117m) in cash, the companies said in separate statements.

The target offers various personalised banking, investment and planning services to high net worth individuals and families. Last year it posted a loss of some GBP50m. The deal involves branches in Geneva, Zurich, Monaco and Gibraltar and a representative office in Montevideo. The agency office in Miami, as well as Lloyds’s UK offshore businesses, including the Channel Islands, Isle of Man and Gibraltar, are not part of the transaction, the vendor said.

The purchase price includes an initial payment of GBP65m, to be made at closing, with the remainder of the sum to be provided as a deferred payment over a period of two years, depending on the business’s performance.

The acquisition, which is in line with UBP’s growth strategy, will allow the company to enhance its presence in Switzerland, as well as in its core growth markets, including the Middle East and Latin America. The addition will bolster its assets under management by more than CHF10bn (USD10.4bn/EUR8bn). At the end of April, they stood at at CHF83.2bn, the buyer said.

On the other hand, Lloyds stated that the sale was part of a plan to shrink and simplify its international presence, while focusing on the UK, Channel Islands and the UK Expat marketplace.

The transaction hinges upon regulatory approvals, among other conditions. It is seen to be completed in stages. The vendor said it expects to transfer the bulk of the business in the second half of 2013 and the remaining part by the first quarter of 2014. It added that in line with its strategy, it will also intended to exit South Africa.

UBP took counsel from Caurus Partners Sarl and MilleniumAssociates AG on the transaction.

Lloyds to bank £325m from sale of commercial property loans

UK Lloyds Banking Group plc (LON:LLOY) said Friday it had inked an accord to divest a portfolio of UK commercial real estate loans to Promontoria Thames Ltd for GBP325m (USD501.2m/EUR384.6m) in cash.

The buyer is an affiliate of Cerberus Global Investments.

The deal is seen to be finalised in the final quarter of this year, the vendor said. It should not affect Lloyds significantly in view of the considerable impairment provisions held against the portfolio, the company added.

Through the move, Lloyds delivers further on its non-core asset reduction plan. The funds raised via the disposal will be earmarked for covering general corporate needs, the vendor said.

The particular portfolio, whose gross assets amount to GBP527m, generated losses of GBP47m last year.

NBNK revises offer for 632 Lloyds Bank branches

British banking investment vehicle NBNK Investments Plc (LON:NBNK) said on Wednesday it had tabled a revised offer to buy the retail and commercial business Project Verde of Lloyds Banking Group Plc (LON:LLOY) before Lloyds’ board meeting later today.

The bidder said its fresh proposal outlines the basis of future talks with Llyods over a deal. However, due to the pressing calendar for the disposal of the package including 632 Lloyds branches, there is little time left for a deal to be agreed and completed, NBNK said.

Lloyds needs to sell the Verde assets by the end of November 2013, under an agreement with the European Union (EU) in exchange for the state aid received during the financial crisis.

The lender said it would provide updates to shareholders on the divestment plan by the end of this week.

The vendor is also in talks over a deal with the Co-operative Group (Co-op), which remains its preferred bidder.

NBNK’s previous proposal for the Lloyds branches included an alternative demerger, granting Lloyds shareholders an option to get directly cash for their interest, or shares in the combined group, the company has said. It gave no details on its new offer.

With this deal, NBNK aims to create a new nationwide player in UK’s high street banking segment.

As it was created to build a new bank with 4% to 6% of the UK’s sector market and some 400 to 600 branches through acquisitions, the discussions with Lloyds are viewed as key to NBNK’s prospects, it said earlier in June.

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British bank Lloyds to dispose of Japanese GoLloyds unit

British lender Lloyds Banking Group Plc (LON:LLOY) announced on Tuesday it will dispose of its remittance operations in Japan, called GoLloyds, to local Shinsei Bank Ltd (TYO:8303) for a non-specified sum.

The sale is part of Lloyds’ strategy of narrowing its international presence, the lender said, adding it does not expect the transaction to have a material impact on its accounts. At present, Lloyds’ Japanese presence consists of a branch that conducts remittance and deposits business.

Separately, Shinsei Bank said the deal will complement and further improve the suite of foreign currency deposit services for individual customers. The bank also noted that demand for overseas remittance services in the country is rising as the number of both foreign residents and overseas visitors is seen to go up in the near future.

The divestment needs to be greenlighted by local regulators and is projected to close during the second half of the year. The total assets of the business being sold were GBP1.5m (USD2.3m/EUR1.8m) as at the end of December 2011.

In late March 2012, Lloyds announced it was selling its onshore Dubai activities, which had total assets of GBP482m, to HSBC Bank Middle East Limited as part of the same strategy.