Lloyds share price heads south as Q1 profit nearly halves

Shares in Lloyds Banking Group (LON:LLOY) have lost more than two percent in London this morning, drifting further below the taxpayer’s break-even price, after the bailed-out lender revealed that its first-quarter profits had nearly halved after the group redeemed some of its high interest-paying bonds. The bank also set aside £115 million to cover conduct matters.

As of 08:18 BST, Lloyds’ share price had lost 2.77 percent to stand at 67.33p, trading well below the taxpayer’s break-even price of 73.6p, and underperforming the benchmark FTSE 100 index which is 0.87 percent worse off at 6,265.08 points. The lender’s shares have lost some 12 percent of their value over the past year, and are down more than six percent in the year-to-date.
Lloyds announced in a statement this morning that its statutory pre-tax profit had slumped to £654 million in the first three months of the year, as compared with £1.2 billion in the first quarter of 2015. The steep fall in the lender’s profit was largely due to Lloyds’ controversial decision to buy back its enhanced capital notes (ECNs), with the move triggering a £790-million charge during the reported period. The company also booked £115 million “to cover retail conduct matters,” but pointed out that no further provisions for the payment protection insurance scandal had been taken in the first quarter.

Stripping out the ECNs buyback and one-off costs, Lloyds’ underlying first-quarter profit slipped only marginally to £2.1 billion from £2.2 billion a year ago. The result beat the £2-billion average forecast of Bloomberg-polled analysts.
“In the first three months of this year we have continued to make good progress, delivering a robust financial performance and maintaining our strong balance sheet,” Lloyds chief executive António Horta-Osório said in the statement.
Lloyds, which was rescued by the UK taxpayer during the financial crisis, still remains about nine-percent owned by the government, which has been unable to offload its remaining holding in the bank on account of the fall in the bank’s share price below the break-even level. Reuters reported today that banking and political sources expected the sale of Lloyds’ shares to resume after the referendum on the UK’s membership of the EU in June, concluding with a larger offer to retail investors.
As of 08:36 BST, Thursday, 28 April, Lloyds Banking Group share price is 67.31p.