Lloyds Banking Group has said
pre-tax profits for the three months to the end of September rose to
£958m, up from £751m a year earlier.
However, the bank's shares
fell as it set aside more money to compensate customers over the
mis-selling of Payment Protection Insurance (PPI).
Lloyds set aside another £500m for PPI compensation, taking its total PPI bill to £13.9bn.
The bank also made less profit than City analysts had expected.
Underlying profit slid to £1.97bn from £2.16bn a year ago after tougher trading conditions in commercial banking, the bank said.
Analysts
had estimated about £2.16bn for the underlying figure, which excludes
PPI and which the bank considers a better measure of day-to-day
business.
'Excessive' PPI wait
The
financial regulator, the Financial Conduct Authority (FCA), has said it
intends to set a 2018 deadline for people to claim compensation for
mis-sold PPI.
The insurance, which offered to cover repayments on
loans, was sold to millions of people who either did not want, need or
understand it.
The
FCA's decision was regarded as a boost for Lloyds, which has now set
aside £13.9bn to compensate customers for PPI - more than any other
bank.
Lloyds is "awaiting consultation to come out" over a time
cap on PPI repayments, said finance director George Culmer, but he
thought the deadline should be brought forward. "It's our view that two
years is excessive."
Lloyds said its net interest margin, a key profitability measure for
the bank, rose to 2.64% from 2.47%. The rate is the difference between
the money paid out to depositors and creditors and the interest taken
from loans.
The bank said the margin was likely to be about 2.63%
for the rest of the year, a superior rate to the 2.6% previously
estimated.
A tougher commercial banking environment sent Lloyds' revenues down 4% to £4.2bn.
"We
see the data as a reinforcement of weaker macro and corporate appetite
going into the year end and next year," said Chirantan Barua, a banking
analyst for Bernstein.
"The UK is not really immune to the global slowdown should be the takeaway."
Lloyds' shares dipped 4.6% in London trading.
The
lender also topped up a fund it has set aside for other compensation to
customers. It added £100m in the three-month period to make £535m for
the year so far.
The cash pot is being used to compensate customers for mis-sold packaged bank accounts, a £117m fine for mis-handling PPI complaints and other infractions. The bank does not provide a full breakdown of what else the fund is for.
Share sale
The
government owns a 12% stake in Lloyds and has said it plans to sell
shares worth at least £2bn in the bank to private investors, as part of
its plan to put the bank back in private hands.
As part of this, a sale aimed at private investors will be launched next spring.
Members
of the public will be offered a 5% discount to Lloyds' market price and
small investors seeking shares worth less than £1,000 will get
priority.
Those who keep their shares for at least 12 months will get one bonus share for every 10 they own.
The value of the bonus share incentive will be capped at £200 per investor.
The
move echoes government privatisations in the 1980s, when the
Conservative government sold shares worth £3.9bn in British Telecom and a
£5.6bn stake in British Gas.
The government saved Lloyds from
collapsing at the height of the financial crisis in 2008 with a £20.5bn
bailout, leaving it with a 43% stake.
The Treasury has recouped
almost three-quarters of public funds used to rescue the bank by selling
shares to institutional investors, such as pension funds.
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