Equities By Region Finance and Banking UK

Lloyds share price jumps as bailed-out lender delivers profit rise

Shares in Lloyds Banking Group (LON:LLOY) have jumped higher in London this morning as the bailed-out lender posted a rise in second-quarter profit. Britain’s biggest mortgage lender, however, set aside a further £460 million for the payment protection insurance (PPI) scandal, ahead of a claims deadline next year.

As of 08:47 BST, Lloyds’ share price had added 2.16 percent to 63.73p, outperforming the broader UK market, with the benchmark FTSE 100 index having fallen into the red and currently standing 0.59 percent lower at 7,702.96 points. The group’s shares have lost just under three percent of their value over the past year, as compared to about a 3.7-percent gain in the Footsie.

Lloyds posts rise in profits

Lloyds announced in a statement this morning that it had made statutory profit after tax of £2.3 billion, up 38 percent, and return on tangible equity of 12.1 percent. The lender’s earnings per share rose 45 percent to 2.9p, while the group’s underlying profit  increased seven percent to £4.2 billion. Lloyds further announced an interim dividend of 1.07p per share.

The bailed-out lender booked £460 million in the second quarter for PPI claims, with volumes of approximately 13,000 per week until the deadline in August 2019, compared to the 11,000 run rate previously assumed. 

Analysts weigh in on results

The BBC quoted Laith Khalaf, senior analyst at Hargreaves Lansdown, as commenting that the lender’s chief executive “António Horta-Osório must be wondering just what he has to pull out of the bag” to push Lloyds’ share price up since it was “roughly the same level it stood at when he became CEO”.

“That's largely because Brexit means some investors don't want to touch UK domestic companies like Lloyds with a bargepole,” he pointed out, adding, however, that while “that sentiment doesn’t look like shifting any time soon, Lloyds shareholders are being paid to wait”.

“The bank is expected to deliver a total dividend of 3.44p this year, equivalent to a 5.5% income yield. Not bad, if you can get it,” the analyst concluded.

As of 09:13 BST, Wednesday, 01 August, Lloyds Banking Group share price is 63.78p.

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