LONDON - Lloyds Banking Group, the British lender partly-owned by the government, said Tuesday that earnings in the third quarter rose 83 percent as it continued to reduce costs and the quality of its loans improved.
Profit for the three months to the end of September rose to 1.5 billion pounds, or $2.5 billion, up from 831 million pounds in the same period last year. The bank said it was ahead of its plan to streamline its operations and focus on its customers at home but had to take an additional charge to compensate clients who were sold improper loan insurance.
The government in September started to sell a 6 percent stake in Lloyds after a multibillion pound bailout from the taxpayers five years ago. Investors picked up the shares after Lloyds had recently returned to posting a profit and many expect the bank, a bellwether of the British economy, to improve earnings as an economic recovery strengthens.
“The outlook for the U.K. economy now looks more positive and the group’s business model is well matched to the economic environment,†Lloyds chief executive officer, António Horta-Osório, said in a statement.
Britain still owns 33 percent in Lloyds and is expected to continue reducing its stake further in the beginning of next year. The shares were priced at 75 pence each. Lloyds’ shares have gained more than 60 percent this year.
The share price increase is good news for Mr. Horta-Osório, who is in line for a bonus of 2.5 million pounds if the share price remains at that level for some time. The share price dropped 2.7 percent to 77 pounds on Tuesday morning in London.
Under Mr. Horta-Osório, Lloyds has shed many businesses that were not part of its main strategy to focus on lending to British customers. It sold its Australian operation and its Spanish retail banking business earlier this year. Lloyds ended or is in the process of ending operations in 21 countries, it said.
Now, Mr. Horta-Osório plans to expand the bank’s market share in products such as credit cards. The bank is also in discussions with Britain’s financial regulator to start paying a dividend again, which it had stopped as the financial crisis forced it to seek government support.
The bank said Tuesday that the amount it had to set aside for bad loans and other impairment charges almost halved to 670 million pounds in the third quarter. It also said that costs to compensate customers for the improper payment-protection insurance exceeded the company’s earlier estimates.
Lloyds took an additional charge on this so-called payment protection insurance of 750 million in the third quarter. Lloyds had already set aside 7.3 billion pounds to compensate claims.
