Lloyds takes $3.1B charge for miss-selling insurance
People walk by a branch of Lloyds Bank in central London, Tuesday, Sept. 17, 2013. (AP Photo/Sang Tan)
Danica Kirka, The Associated Press
Published Monday, February 3, 2014 8:08AM EST
LONDON -- Lloyds bank, the part-nationalized British lender, said Monday it will pay a dividend again for the first time since the financial crisis as it prepares to shed state ownership. The announcement, however, was marred by news it had to set aside another 1.9 billion pounds ($3.1 billion) to cover the excesses of the past.
Lloyds Banking Group PLC said in a preliminary earnings statement that it made an underlying profit of 6.2 billion pounds for 2013, better than analysts had expected despite the new charges. The final earnings figures will be released next week.
The bank confirmed it is preparing to sell the government's stake, a move Treasury chief George Osborne had hinted at late last year. It also said it would pay a dividend for 2013, the first since the bank received a 20 billion-pound bailout in 2008 that saw the government take a 40 per cent stake.
"We expect to apply in the second half of 2014 to restart dividend payments and to deliver progressive and sustainable payments to shareholders thereafter," said Chief Executive Antonio Horta-Osorio. "This will be another important step in our journey to rebuild trust and confidence in our group."
Mistakes from the past were still costing the bank, however. It said Monday it will set aside 1.8 billion to cover claims resulting from the miss-selling of payment protection insurance -- bringing the total to almost 10 billion pounds. Some 130 million pounds was also set aside for interest rate hedging products that were inappropriately sold to small and mid-size businesses.
Richard Hunter, the head of equities at Hargreaves Lansdown Stockbrokers, said that while the profit figure was positive, the extra charge was worrying.
"The (payment protection insurance) number is disappointing not only in terms of the cumulative figure now nudging 10 billion pounds, but also because it perpetuates concerns around when this saga will actually come to an end."