Lloyds Banking Group saw its share price fall 4 per cent after it announced a 46 per cent fall in pre-tax profits for the first three months of the year, to £654m.
In the results, Lloyds revealed it has set aside £115m for “retail conduct” issues, but refused to disclose what the provision relates to. It has not set aside any extra money for missold payment protection insurance.
Lloyds partly attributes the fall in profits to a £790m hit for redeeming a batch of investor bonds. The bank also paid £161m in redundancy payouts, mainly as part of its “simplification programme” to improve business processes.
Shares in the bank dropped 4 per cent after the results were announced, which could further delay the government’s share sale further this year, says Russ Mould, investment director at AJ Bell.
The planned share sale of the government’s remaining £2bn stake in the bank was postponed earlier this year, after fears of market volatility.
Mould says Lloyds’ share price drop is surprising, considering market reaction to other banks’ poor results recently.
“The reception given to the first-quarter figures has been as chilly as the recent weather, which in some ways is surprising, as a number of other banks have posted substantial year-on-year drops in earnings but seen their share prices creep higher – Standard Chartered, Spain’s Banco Santander and Germany’s Deutsche Bank are just three examples from this week,” he adds.
Speaking about the results, Lloyds group chief executive António Horta-Osório says: “In the first three months of this year we have continued to make good progress, delivering a robust financial performance and maintaining our strong balance sheet.
“These results demonstrate the strength of our differentiated, simple, low risk business model and reflect our ability to actively respond to the challenging operating environment.”