Lloyds Banking Group reports a 38% decline in net income in H1

Lloyds Banking Group reports a 38% decline in net income in H1
Written by:
Wajeeh Khan
July 30, 2020
  • Lloyds Banking Group reports a 38% decline in net income in the first half.
  • The British retail bank reports a pre-tax loss of £602 million in H1.
  • The UK-based lender says its CET 1 ratio jumped from 13.6% to 14.6%.

Lloyds Banking Group plc (LON: LLOY) said on Thursday that it concluded the first half (H1) of the ongoing financial year with a pre-tax loss. The company attributed its dovish performance to the Coronavirus pandemic that resulted in a sizable impairment charge. Lloyds also said that it was uncertain how it was going to perform in the upcoming months.

Shares of the company opened about 5% down on Thursday and tanked another 5% in the next hour. At 26 pence per share, Lloyds Banking Group is roughly 60% down year to date in the stock market. Learn more about why prices rise and fall in the stock market.

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Lloyds’ pre-tax loss prints at £602 million

At £602 million, the largest British retail bank’s pre-tax loss in H1 came in significantly weaker than £2.90 billion of profit in the same period last year. The company’s own consensus for the first half was at £42 million of profit. Lloyds started this year with an operational disruption as its online services collapsed for a few hours in the first week of January.  

The London-based lender registered a massive 38% decline in its net income in the first six months of the fiscal year to £5.48 billion. In comparison, Lloyds was expected to print £7.4 billion of net income in H1. Analysts at Credit Suisse upgraded their rating for Lloyds Banking Group last week.

In the first quarter, the British financial institution had booked a charge of £1.43 billion that ballooned further in Q2 to £2.39 billion as per its report on Thursday. The Coronavirus pandemic that has so far infected more than 300,000 people in the United Kingdom and caused a little under 46,000 deaths fuelled credit losses in recent months.

Lloyds’ CET 1 ratio jumps from 13.6% to 14.6%

The health crisis resulted in a combined impairment charge of £3.82 billion in the first and second quarters combined. The company’s consensus for impairments was capped at a much lower £2.9 billion.

On a year over year basis, the bank’s CET 1 (common equity tier 1) ratio jumped from 13.6% last year to 14.6% at the end of the second quarter.

Lloyds Banking Group performed fairly upbeat in the stock market last year with an annual gain of about 20%. At the time of writing, the British lender is valued at £18.55 billion and has a price to earnings ratio of 7.60.