LONDON - Lloyds Banking Group said on Thursday that its profit declined 24.7 in the first quarter, but that its outlook continued to improve as it cut costs and avoided additional charges for legacy problems.
In the first three months of the year, Lloyds, which is partly owned by the British government, posted a profit of 1.16 billion pounds, or about $1.96 billion, compared with £1.54 billion in the prior year’s first quarter. The 2013 first-quarter results included a gain of £776 million from the sale of government securities.
The bank said it plans to go forward with an initial public offering of TSB Bank, which has 631 branches, in the summer and is on track to seek permission from the British government later this year to restart paying a dividend.
In the first quarter, Lloyds posted a statutory profit before tax of £1.37 billion, an important measure for the lender. It was the second quarter in a row that the bank had posted a statutory profit after last doing so in 2010.
António Horta-Osório, the Lloyds chief executive, called the results good progress from a more efficient and less risky operation focused on British consumers and businesses. The bank is benefiting from Britain’s economic recovery and supporting it, he said.
On an underlying basis, Lloyds posted a profit of £1.8 billion in the quarter, up 22 percent from the £1.48 billion it posted in the first quarter of last year. The underlying profit was inline with analysts’ expectations.
On a conference call with journalists on Thursday, George Culmer, the Lloyds finance director, said the bank continues to expect to seek permission from financial regulators in the second half of this year to restart its dividend, with the hope of paying a dividend for 2014.
The British government, which provided the Lloyds Banking Group with a £17 billion bailout during the financial crisis, holds 24.9 percent stake in the lender. Through two offerings, the government has reduced its stake from about 39 percent, and done so at a profit for the public.
Selling the government’s remaining holdings of Lloyds is a priority for George Osborne, the chancellor of the Exchequer.
No further provisions were taken by the bank in the first quarter to compensate customers who were wrongly sold loan insurance, a product that has cost British banks billions. The bank took a charge of £3.46 billion to cover so called payment protection insurance and other legacy issues in the fourth quarter. The bank has reserved £9.8 billion to cover potential claims on the insurance since 2011.
Net interest income - the measure of what a bank earns on its lending after deducting what it pays out on deposits and other liabilities - rose 10 percent to £2.81 billion, up from £2.55 billion a year ago.
The bank’s costs declined 5 percent to £2.29 billion in the quarter.
The bank’s core Tier 1 capital ratio, a measure of a bank’s ability to weather financial disturbances, rose to 10.7 percent, compared with 10.3 percent at the end of 2013.
