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Lloyds chief Eric Daniels gives investors surprise lift with profit forecast
Nick Goodway19 Mar 2010
Eric Daniels, chief executive of Lloyds Banking Group, delighted the bank's three million shareholders today with a prediction that it will make a profit this year.
Most City analysts had not expected the group to return to profit until at least next year or even 2012.
The bank, formed through the merger of Lloyds and HBOS 14 months ago, is 41% owned by the taxpayer following a massive Government bail-out.
Daniels told a conference run by investment bank Morgan Stanley in London: “Overall, based on the group's current economic and regulatory assumptions which remain unchanged since our recent 2009 preliminary results announcement, the group believes that it will be profitable on a combined business basis.”
The shares jumped 5p to 60.6p.
Last year Lloyds lost £6.3 billion, down slightly from its loss of £6.7 billion in 2008. The bulk of the losses came from bad debt write-offs, mainly among commercial loans made by Bank of Scotland before the credit crunch.
When the figures were announced last month Daniels merely said he could see “significant improvement in 2010 and beyond”.
Analysts' early forecasts for this year's outcome range widely, with a consensus for a loss of about £300 million. But following the announcement the range shifted to pre-tax profits of between £500 million and £1 billion.
Daniels said: “In the first 10 weeks of 2010 the group's trading performance has been strong and we are pleased with the group's performance against each area of recent guidance.
"The banking net interest margin is trending in line with recent guidance and this has supported a good level of income growth, on a combined businesses basis and excluding last year's gains from liability management transactions.”
The big improvement since the full year results is the trend on bad debts. At the results presentation Daniels said they had fallen by 21% in the second half of last year and he expected a similar scale of decline during 2010 and further progress in 2011.
Today he said: “Impairment provisions are currently trending at lower levels than anticipated and as a result the group now expects to deliver a better impairment performance than previously guided, in both the retail and corporate businesses, in 2010.”
Under European Commission state aid rules Lloyds will not be allowed to restart paying dividends until 2012 at the earliest, even if it makes a profit.
But today's news could mean the Government, which paid an average 74.35p a share for its stake, may be able to look at selling off some of its shareholding earlier than expected.
Reader views (9)
Millions of Halifax customers are paying £364 per annum charges because they are using their arranged overdraft and are not in a position to be able to not use it, the poorer end of society. This is how Lloyds get their money in. They disgust me.
- Terry S., Exeter, UK., 19/03/2010 13:40
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Some commentators tailk about accounting pratice but this is the same of all major companies. I think many commentators at obscured by their policital leanings as opposed to looking at the genuine business side of this news, although I accept there are political ripples with good financial news.
The simple fact is that the bank is coming through it's troubles and will be returning to profitabilty, in turn the tax payer can expect billions in profits from the share sales having purchased the shares at a fire sale.
Credit where credit is due to the managements which is steering the group in the right direction.
- Richard, London, 19/03/2010 12:53
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I will tell you why they are going to make a profit. Its because investors and savers are getting nearly nil percent return on their money!
- Brian G, Norfolk Gorleston, 19/03/2010 11:30
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This profit will no doubt come at the expense of calling all debts good or bad and reducing further still customer services! A 5 year old child can do the same.
Big deal! Its what you lot saddled the rest of us with for the rest of our lives that counts!
- J.Martins, london, 19/03/2010 11:17
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If Eric had done his job properly in the first place the merger with HBOS should never have occurred. Neither he, nor the Board, should get any pay increases or bonuses until the dividend has been restored, and the share price has risen to where it was prior to this ill fated acquisition.
- Mike Crane, Bristol, England, 19/03/2010 10:51
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JTDX,
If you had over provided, you'd have had qualified accounts and been sacked soon after.
- Scotty, london, 19/03/2010 10:49
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Eric Daniels gave up his bonus this year. It was to be paid in shares which he would not get for three years. As a small - originally LloydsTSB - Shareholder I can not forgive Gordon for selling the bank "a pig in a poke" But Daniels - who could have walked away with millions in his pocket - is turning this bank around and people like me (and the taxpayer "shareholders") should commend him for standing at his post and getting on with the job, I am starting to see the value of my shareholding recover and if he keeps up this good work then should we begrudge him bonuses in the future?
- Fuzzylogic, Billericay, 19/03/2010 09:54
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Great news! Does this mean Lloyds will employ somebody in their IT department to keep the internet banking service running? it keeps breaking down and nobody knows how to fix it.
- Simon, London, 19/03/2010 09:43
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If i got a job as director at lloyds last year then the first thing I would have done would be to write down bad debts excessively.
Then about a year later I could could announce a profit
by writing back some of the bad debts provision.
Oviously I would then want to get a mega-bucks bonus!
- Jtdx, cph, denmark, 19/03/2010 08:51
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