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Sunday 19 August 2018

Lloyds booked £105m loss on Irish mortgages

Lloyds has been forced to set aside more than €19bn in total for the PPI scandal. Photo: PA
Lloyds has been forced to set aside more than €19bn in total for the PPI scandal. Photo: PA
Donal O'Donovan

Donal O'Donovan

UK lender Lloyds Banking Group booked a £105m (€118m) loss on the sale of its Irish mortgage portfolio, according to financial results published yesterday.

Previously, the bank said it expected to take a £110m hit on the sale.

In May, the bank announced the sale of £4bn (€4.5bn) of Irish mortgages to a consortium led by Barclays Bank. The sale involves 27,000 home loans originally issued before the crash by Bank of Scotland Ireland (BoSI), which was merged with Lloyds in the wake of the downturn. The sale, in effect, completes that bank's exit from BoSI's disastrous Irish business.

In its results yesterday, the bank said the Irish sale will boost its capital position by 25 basis points. The disposal is expected to be completed in the second half of the year, Lloyds said.

Lloyds is Britain's largest mortgage lender. It posted a 23pc jump in pre-tax profit for the second quarter, beating analyst estimates, and also upgraded its financial guidance for the full year. It's also setting aside another £460m to compensate customers for improperly sold loan insurance, Lloyds said in its earnings statement yesterday. "The only notable fly in the ointment" is a further payment protection insurance provision taken during the second quarter, said Gary Greenwood, an analyst at Shore Capital, in a note to investors. "Overall, we expect this statement to be taken positively by the market."

The bank's shares climbed 1.9pc in early morning trade in London yesterday.

After restoring the bank to full private ownership, CEO Antonio Horta-Osorio is investing £3bn to boost technology and income from insurance and retirement products, while striving to keep a lid on expenses. Lloyds is aiming for a cost-to-income ratio in the low 40s, which would make it one of the most efficient European banks.

Lloyds said pretax profit climbed to £1.52bn in the second quarter from £1.24bn a year ago. Net interest income climbed just under 6pc to £3.17bn for the quarter.

The latest PPI top-up in the second quarter raises the total set aside for the scandal by the London-based bank to more than £19bn. Analysts at Morgan Stanley expected a charge of £410m for the second quarter, according to a note. Payment protection insurance has been lingering as an issue as consumers have until August 2019 to make a complaint. It was often sold using aggressive tactics and in the worst cases, banks misled customers by telling them that PPI was mandatory for loans.

(Additional reporting Bloomberg)

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