Lloyds TSB has announced a 7 percent pre-tax profit rise in the first six months of the year. Britain's fifth-biggest banking group said that despite challenging conditions that continue to prevail in the UK markets, it had managed to post substantial profits, which stood at £1.67 billion.
However, despite this excellent showing, the bank has been forced to tank up its cover for bad debts, which rose sharply in the first six months of the year. So much so that Lloyds has set aside a £511 million provision for bad debts. Out of this amount £416 million covers personal loans while the remaining £95 million is targeted at bad corporate loans. However, Lloyds Chief Executive Eric Daniels was by no means prepared to admit that bad debts were eating into the profits, "We have seen some softening and deterioration in the unsecured book, but we are quite comfortable. We are seeing a slowdown, but the consumer hasn't stopped dead by any means," he said.
But, deputy chief executive Michael Fairey admitted that for some customers repayment had become impossible, "There is no doubt consumers are more indebted than they were but rising incomes mean they are more able to service their debts. We don't see a recession or a big increase in unemployment on the horizon. If tax or interest rates were to rise that could have an impact," he said.
Lloyds is the first big bank that has reported half-yearly profits so far. Customer lending rose by 4 percent to £167.6 billion, while concurrent deposits rose 3 percent to £130.6 billion. Credit card balances stood at a healthy £7.7 billion, an increase of 3 percent. However, mortgage lending increased by four per cent to £83.7 billion.
Summing up the overall performance, Mr. Daniels said, "Most of our new retail lending during the half has been to existing customers where we believe we have a better understanding of an individual customer's total financial position. We are well positioned to deliver a good trading performance in the second half of 2005 and beyond."
Posted
on : Sun, 31 Jul 2005 12:30 GMT | Banking News
By : Chris Rowe
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