Britain's bailed-out Lloyds bank said Thursday it plunged into vast losses in the first half, after setting aside billions of pounds to compensate customers over mis-sold payment protection insurance.Lloyds Banking Group (LBG), which is 40.2-percent owned by the state after a huge bailout, reported in a results statement a net loss of £2.3 billion (2.6 billion euros, $3.8 billion) in the six months to June.
LBG, which recently slashed 15,000 jobs as it bids to halve its international division, said its interim loss after taxation compared with a net profit of £596 million in the first half of last year.Pre-tax profit excluding exceptional charges tumbled 31 percent to £1.1 billion but beat market expectations for £1.0 billion, according to analysts polled by Dow Jones Newswires.
Lloyds was mainly hit by a one-off charge of £3.2 billion after being forced to compensate clients who were mis-sold insurance policies. The lender was also hurt by higher bad debt losses in Ireland."The group performed in line with our expectations in the first half of 2011 despite the ongoing challenges of economic and regulatory uncertainty, the effects of which ... are reflected in these results," LBG chief executive Antonio Horta-Osorio said in the earnings release.Banking sector shares were hammered on Thursday on heightened fears over exposure to the worsening eurozone debt crisis, which is now threatening to engulf Italy and Spain.
Investor concerns are also mounting over the health of the global economy following a series of poor economic data.Lloyds shares plunged 10.19 percent to finish at 34.99 pence on the London stock market, which ended 3.43 percent lower at 5,393.14 points -- the lowest closing level since early September 2010.British banks in April lost a high court appeal against tighter regulation of PPI which provides insurance for consumers should they fail to meet repayments on a credit product such as personal loans, mortgages or payment cards.PPI became controversial after it was revealed that numerous consumers had been sold the insurance without understanding that the cost was being added to their loan repayments. Britain has since banned simultaneous sales of PPI and credit products.
LBG on Thursday said its bad debt losses narrowed by 17 percent to £5.4 billion in the first half, although the impairment charge for Ireland increased 14 percent to £1.78 billion as a result of the country's weak property market.Horta-Osorio, who has led LBG since March, unveiled in June plans to save the bank £1.5 billion a year, aided by the scrapping of 15,000 jobs, or 14 percent of its staff.
"We don't see that figure changing," he told a conference call with reporters on Thursday.
LBG has slashed more than 40,000 posts since 2009 as it looks to nurse its way back to health after its part-nationalisation at the height of the global financial crisis.
The bank confirmed it had received "a number of credible initial approaches" for the 632 branches it is being forced to sell by EU regulators following its £20 billion bailout, adding it was hopeful of finding a buyer by the end of 2011.
The lender, which was sunk by the ill-fated 2008 takeover of rival bank HBOS, is also cutting its international activities to 15 nations by 2014, compared with the current level of 30.
Horta-Osorio's predecessor Eric Daniels left amid shareholder anger after he oversaw the government-brokered takeover of HBOS. A Portuguese national, Horta-Osorio formerly led Santander UK, the UK arm of the Spanish banking group.