Home Business Lloyds Bank shares plummet in wake of profit dip

Lloyds Bank shares plummet in wake of profit dip

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Lloyds Banking Group, the major British financial institution which was formed when Lloyds TSB acquired HBOS seven years ago, has seen its shares slump after reporting a fall its underlying profits.
However, after an initial dip, its stock recovered as analysts and media looked in depth at the group’s year-to-date statistics and its capital reserves, which are solid and should bode well for giving investors their dividend payouts.
Shares had recovered to be down by just 0.3 per cent by mid afternoon.
The group’s results for the third quarter of the financial year revealed a pre-tax profit slump of 15 per cent, down from £958m to £811m compared to the previous year.
Its net interest margin also fell from 2.74 per cent to 2.69 per cent following the Bank of England’s decision to cut the base interest rate to a record law.
The bank’s underlying profit for the third quarter dipped by three per cent to reach £1.9bn.
This fall was coupled with the bank setting aside £1bn so it could pay out expected compensation payments for the mis-selling of payment protection insurance.
That takes its total costs to £17bn following the financial regulator’s decision to extend the deadline for PPI claims until 2019.
Lloyds also revealed it had issues with its pension fund which has gone from a surplus of £430m to a net deficit of £740m.
Analysts said there were a number of issues which were making the stock market nervous, including putting such a large extra sum to the side for PPI payouts, along with the reduction in net interest margin and the overall decline in profits.
However, despite that, shares quickly rose again as investors put the figures into context, deciding that year-to-date financial statistics were impressive.
This latest set of financial figures comes after the group was accused by unions of putting place a strategy of “death by a thousand cuts” after it announced it was making 1,340 job cuts in a bid to reduce costs.
The redundancies are set to affect branch staff and are part of a continuing programme of savings by the bank’s chief executive, António Horta-Osório.
However, union boss Ged Nichols, who is general secretary of Accord, said: “We know the outlook for banks is tough due to record low interest rates, falling revenues and the changes in technology and customer behaviours. This ‘death by a thousand cuts’ approach does nothing to give confidence to those who will be staying with the business, trying their best to meet customers’ needs and help to sustain the group for the future.”