Shares in Lloyds Banking Group (LON:LLOY) have fallen deep into the red in today’s session even as the company posted a rise in underlying profit for the first three months of the year. The bailed-out lender, however, revealed that the payment protection insurance (PPI) scandal had continued to pressure its performance during the reported period.
As of 08:39 BST, Lloyds’ share price had given up 1.37 percent to 62.59p. The group’s shares are underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.42 percent lower at 7,354.58 points.
Lloyds posts first-quarter results
Lloyds announced in a statement today that its statutory profit after tax had climbed two percent to £1.2 billion in the first quarter of the year, while underlying profit had come in eight percent higher at £2.2 billion, on the back of increased net income and lower operating costs.
The blue-chip group, however, disclosed that it had taken a PPI charge of £100 million during the quarter, reflecting increased costs from higher gross complaint volumes. Lloyds also took a one-off charge on exiting the Standard Life Aberdeen (LON:SLA) investment management agreement.
The update comes after Lloyds cheered investors up yesterday with news that it would lower its target for its Common Equity Tier 1 ratio, with the move fuelling hopes that the company would distribute the extra excess capital to shareholders.
“The Group has a progressive and sustainable ordinary dividend policy and the Board will continue to give consideration to the distribution of surplus capital at the end of the year,” the FTSE 100 group said in today’s statement.
Analysts weigh in on update
“Compensation for customers mis-sold PPI continues to gnaw away at Lloyds profits, whilst it missed on top line revenues in what’s probably not the best quarter for the bank,” said Neil Wilson of Markets.com, as quoted by Proactive Investors. “Net interest income remains ok but we wonder if there is enough in here to continue the rally in the shares.”