Lloyds forecasts return to profit in 2010
Lloyds Banking Group Plc, the UK’s biggest mortgage lender, said it expects to return to profit this year because of lower bad loans than forecast. The shares soared.
Lloyds “will be profitable on a combined businesses basis in 2010,” helped by “strong” earnings in the first 10 weeks of the year, the company said today in a statement.
“The group now expects to deliver a better impairment performance than previously guided, in both the retail and corporate businesses, in 2010.”
Lloyds, 41pc owned by the British government after its bailout during the global financial crisis, posted a pretax loss of £6.3bn (€7bn) last year on provisions for bad debt after the bank’s takeover of HBOS Plc.
Chief Executive Officer Eric Daniels last month said commercial property impairments were declining.
“We are actually quite positive on Lloyds’ earnings,” Andrew Lim, an analyst at Matrix Corporate Capital LLC in London with a “hold” rating on the stock, wrote in a research note.
The risk remains “that the market will increasingly come to view the company as under-capitalised under Basel III” rules, he said.
The bank may need to raise as much as £7.8bn to meet new capital rules proposed by the Basel Committee on Banking Supervision that come into effect in 2012, Lim wrote in a separate note in January.
Lloyds had indicated its 2010 impairment charge would be about £15bn, said Ian Gordon, an analyst at Exane BNP Paribas in London, who has an “outperform” rating on the stock.
“0ur forecast was £14.3bn, and today’s unscheduled trading update suggests that the outturn may yet be even better.”
Lloyds, which has taken more than £20bn of taxpayer support to boost its capital, will publish an interim trading statement on April 27, the London-based banks said.
Lloyds led UK bank’s higher, rising 7.9pc to 59.93 pence as of 9:07am in London, marking its biggest gain since August 6.
Royal Bank of Scotland Group Plc, the biggest government-controlled bank, rose 5.8pc to 44.45 pence and Barclays Plc rise 1.9pc to 359.7 pence.