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| Lloyds sets aside extra £1bn for PPI mis-selling | Lloyds sets aside extra £1bn for PPI mis-selling |
| (about 9 hours later) | |
| Lloyds Banking Group has set aside a further £1bn to pay compensation for mis-sold payment protection insurance (PPI). | Lloyds Banking Group has set aside a further £1bn to pay compensation for mis-sold payment protection insurance (PPI). |
| The extra provision was expected after the deadline for PPI claims was extended to June 2019 | The extra provision was expected after the deadline for PPI claims was extended to June 2019 |
| The announcement came as the bank announced that pre-tax profits for the three months to the end of September fell 15% to £811m. | The announcement came as the bank announced that pre-tax profits for the three months to the end of September fell 15% to £811m. |
| Total income for the quarter rose by 1% to £4.27bn. | Total income for the quarter rose by 1% to £4.27bn. |
| Lloyds is 9% state-owned, but earlier this month the government said it was scrapping plans to sell its remaining shares in the bank to members of the public. | Lloyds is 9% state-owned, but earlier this month the government said it was scrapping plans to sell its remaining shares in the bank to members of the public. |
| It is now planning to sell its shares via a "trading plan", with small tranches of shares sold to institutional investors. | It is now planning to sell its shares via a "trading plan", with small tranches of shares sold to institutional investors. |
| The extra provision for PPI claims comes on top of the £16bn Lloyds has already set aside to tackle PPI mis-selling. It is the bank worst affected by the PPI mis-selling scandal. | The extra provision for PPI claims comes on top of the £16bn Lloyds has already set aside to tackle PPI mis-selling. It is the bank worst affected by the PPI mis-selling scandal. |
| In the third quarter, Lloyds also took a charge of £150m to cover the cost of other "conduct issues" - mostly related to the sale of packaged bank accounts. | In the third quarter, Lloyds also took a charge of £150m to cover the cost of other "conduct issues" - mostly related to the sale of packaged bank accounts. |
| Underlying profit - before for the provisions for PPI compensation and the other conduct issues were taken into account - was £1.91bn for the three-month period, down 3% on a year earlier. | Underlying profit - before for the provisions for PPI compensation and the other conduct issues were taken into account - was £1.91bn for the three-month period, down 3% on a year earlier. |
| Rate cut impact | Rate cut impact |
| The bank said its net interest margin - the difference between the interest it gets from borrowers and what it pays savers - was 2.69% for the third quarter, down from 2.74% in the second quarter, "partly reflecting the base rate change in early August". | The bank said its net interest margin - the difference between the interest it gets from borrowers and what it pays savers - was 2.69% for the third quarter, down from 2.74% in the second quarter, "partly reflecting the base rate change in early August". |
| That was when the Bank of England cut its key interest rate to 0.25% from 0.5% as it attempted to stimulate the UK economy in the aftermath of the Brexit vote. | That was when the Bank of England cut its key interest rate to 0.25% from 0.5% as it attempted to stimulate the UK economy in the aftermath of the Brexit vote. |
| Low interest rates have a negative impact on banks' performance, because it means they make less from long-term loans. | Low interest rates have a negative impact on banks' performance, because it means they make less from long-term loans. |
| "The bank's net interest margin continues to be significantly hampered by the low interest rate environment, because it earns less of a turn on each £1 it takes from depositors to lend out to borrowers, but at least that margin is holding steady," said Laith Khalaf, senior analyst at Hargreaves Lansdown. | "The bank's net interest margin continues to be significantly hampered by the low interest rate environment, because it earns less of a turn on each £1 it takes from depositors to lend out to borrowers, but at least that margin is holding steady," said Laith Khalaf, senior analyst at Hargreaves Lansdown. |
| Lloyds made a £204m provision to cover bad loans in the quarter, up from £157m a year earlier. However, it said the credit quality of its lending portfolio remained "strong". | Lloyds made a £204m provision to cover bad loans in the quarter, up from £157m a year earlier. However, it said the credit quality of its lending portfolio remained "strong". |
| "One positive offshoot of the low interest environment is that bad loans are still at exceptionally low levels, because debt is so affordable," said Mr Khalaf. | "One positive offshoot of the low interest environment is that bad loans are still at exceptionally low levels, because debt is so affordable," said Mr Khalaf. |
| 'Disappointing' results | 'Disappointing' results |
| In the nine months to the end of September, pre-tax profits were up by 52% to nearly £3.3bn, while total income was little changed at £13.15bn. | In the nine months to the end of September, pre-tax profits were up by 52% to nearly £3.3bn, while total income was little changed at £13.15bn. |
| "The third-quarter figures are largely disappointing, whilst the nine months year-to-date performance is rather more impressive," said Richard Hunter, head of research at Wilson King Investment Management. | "The third-quarter figures are largely disappointing, whilst the nine months year-to-date performance is rather more impressive," said Richard Hunter, head of research at Wilson King Investment Management. |
| "There are some concerning developments within the quarter, such as the additional PPI provision, an increase in impairments, the reduction in net interest margin and the overall profit decline. | "There are some concerning developments within the quarter, such as the additional PPI provision, an increase in impairments, the reduction in net interest margin and the overall profit decline. |
| "Meanwhile, as viewed as a proxy for the UK economy, the shares have been under pressure in anticipation of a hard Brexit, with all its negative connotations and with interest rates remaining at historic lows, the sector in general faces ongoing challenges." | "Meanwhile, as viewed as a proxy for the UK economy, the shares have been under pressure in anticipation of a hard Brexit, with all its negative connotations and with interest rates remaining at historic lows, the sector in general faces ongoing challenges." |
| Shares closed down 0.96% at 55.88p. |