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Lloyds Banking Group has secured an additional £700 million to cover investigations and related court decisions to the possibility of false sales of automotive finance loans.
Lloyds announced the provisions on Thursday along with fourth quarter results. The bank recorded statutory profits before £824 million in the final quarter of the year, falling below market forecasts of less than £1.2 billion, from £1.8 billion a year ago.
High Street lenders recorded a tangible return on capital (a key measure of profitability) of 12.3% for the full year, below the target of 13%. Quarterly revenue rose to £4.4 billion year-on-year, slightly surpassing expectations of £4.3 billion.
Lloyds had already booked a £450 million provision last year to cover potential automotive erroneous selling costs after financial conduct authorities began investigating discretionary committees on loans.
However, analysts raised an estimate of a potential blow to the UK banking sector after the appeals court found it illegal to pay the committee to a car dealer without client informed consent.
The decision urges Lloyd’s CEO Charlie Nun to warn UK about the “investability issue” and banks will protect economic growth when the Supreme Court hears appeals in April. urges the government to intervene. However, the panel of judges on Monday blocked the Treasury’s request to intervene in the case.
Auto finance costs were an unwelcome distraction as Lloyds enters the final stretch of its £4 billion investment plan aimed at modernizing its operations and growing in areas closely tied to interest rates.
Lloyds is driving cost savings, including the introduction of “branch sharing” for customers from three brands: Bank of Scotland, Halifax and Lloyds. The lender also said it will close two offices this year, Liverpool and Dunfam Line. It also reviews hundreds of jobs as part of its efforts to digitalize operations.
Lloyd’s Net Interest Margin – The difference between interest charged on loans and rates paid to customer deposits rose to 2.97% in the fourth quarter. This is because we received the so-called structural life benefits, protecting us from lower interest rates, from 2.95% in the last quarter.
The group said it was “very committed to shareholder distribution,” despite the automotive finance hit, and announced plans to reward shareholders with a final dividend of 2.11p per share. He also said he plans to buy £1.7 billion of shares for up to £1.7 billion.
