A bank branch of Lloyds Banking Group Plc, which opens for four hours, three days a week, stands in Cricklade near Cirencester, U.K. (Photographer: Luke MacGregor/Bloomberg)

Lloyds Pushes Ahead With $2.3 Billion Buyback Amid U.K. Turmoil

(Bloomberg) -- Lloyds Banking Group Plc is betting it can weather the storm from a chaotic Brexit by forging ahead with plans to spend up to 1.75 billion pounds ($2.3 billion) on a share buyback.

  • The lender’s underlying pre-tax profit of 1.8 billion pounds for the quarter, which is up about 10 percent on the same time last year and broadly in line with estimates, excludes funds set aside for mis-sold insurance, volatility and the cost of regulatory reforms, it said in its earnings statement on Wednesday.

Key Insights

  • Chief Executive Officer Antonio Horta-Osorio echoed comments by HSBC Holdings Plc on Tuesday by warning that the near-term outlook remains unclear, “particularly given the ongoing EU withdrawal negotiation.”
  • Britain’s largest mortgage lender posted a further 200 million-pound provision in the quarter for customers who were mis-sold payment protection insurance, as the compensation program draws to a close in August.
  • Lloyds’ shares have risen about 13 percent so far this year, compared to the Bloomberg Europe 500 Banks And Financial Services Index, which has gained about 7 percent.
  • Costs were 49.3 percent of income over the year, a fall of 2.5 percentage points from 2017. Lloyds is aiming for costs of about 40 percent of its earnings, which would make it one of the most efficient European banks.

Dig Deeper

  • Lenders in the U.K. have already set aside almost 40 billion pounds to compensate customers who were improperly sold payment protection insurance, with Lloyds paying out the most so far.
  • After restoring the bank to full private ownership in 2017, Horta-Osorio is investing 3 billion pounds on technology and growing income from insurance and retirement products, while striving to keep a lid on expenses. The bank said on Wednesday it has already spent 1 billion pounds of this budget.

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