Lloyds share price slides as lender warns of Brexit impact

Shares in Lloyds Banking Group (LON:LLOY) have lost more than three percent in London in early morning trade as the blue-chip group warned that the outcome of last month’s Brexit referendum might weigh on its capital generation going forward. The comments came as the bank, which remains about nine-percent owned by the UK taxpayer, posted a rise in profits and hiked its payout to shareholders.

As of 08:25 BST, Lloyds’ share price had lost 3.44 percent to stand at 53.83p, underperforming the benchmark FTSE 100 index which is currently 0.07 percent worse off at 6,745.83 points. The group’s shares are drifting further below the government’s break-even price of 73.6p.
Lloyds announced in a statement this morning that its statutory profit before tax had more than doubled to £2.5 billion in the first six months of the year. Reuters notes that the figure was just ahead of the £2.35-billion average estimate of 15 analysts surveyed by the bank. The company, which used to pay some of the biggest dividends in the UK before the financial crisis, announced an interim ordinary dividend of 0.85p per share, marking a 13 percent rise. Lloyds noted that the Board will assess the capital position, the level of final dividend and whether the distribution of surplus capital is appropriate with the full year results. Earlier this year, the blue-chip lender unveiled a special dividend alongside its 2015 results.

Lloyds noted in today’s statement that following the EU referendum last month, the outlook for the UK economy was uncertain, adding that while the business was expected to “remain highly capital generative”, it was possible the this capital generation might be lower in future years than previously thought.
“Following the EU referendum the outlook for the UK economy is uncertain and, while the precise impact is dependent upon a number of factors including EU negotiations and political and economic events, a deceleration of growth seems likely,” Lloyds’ chief executive Antonio Horta-Osorio said in the statement.
Analysts currently expect the Bank of England to cut interest rates next week, which would weigh on lenders’ profit. The Financial Times quoted Investec analyst Ian Gordon as commenting that Lloyds had already slowed the expansion of its mortgage book to “safeguard” margins in an environment of lower-for-longer interest rates.
The bailed-out lender meanwhile announced plans to close about 200 branches and shed a further 3,000 roles by the end of next year, hiking its run-rate savings target by an extra £400 million to £1.4 billion.
As of 08:41 BST, Thursday, 28 July, Lloyds Banking Group share price is 53.69p.