LONDON - Losses narrowed at Lloyds Banking Group in 2013 despite the British lender taking several billion pounds in charges related to the improper selling of loan insurance and other legacy issues.
For the full year, Lloyds, which is partly owned by the British government, reported a loss of £838 million, or about $1.39 billion, compared with a loss of £1.47 billion in 2012.
Lloyds took a charge last year of £3.46 billion to compensate customers who were wrongly sold payment protection insurance, a controversial product that has cost British banks billions, and to cover other legacy issues. The bank has reserved £9.8 billion to cover potential payment protection insurance claims since 2011.
In 2013, Lloyds returned to a statutory profit before tax of £415 million, an important measure for the lender. The bank last posted a statutory profit in 2010.
“Over the last three years we have reshaped, strengthened and simplified our business to create a low-risk efficient retail and commercial bank that is focused on our customers and on helping Britain prosper,†said António Horta-Osório, the Lloyds chief executive. “This progress has seen the group return to statutory profit in 2013 and despite our legacy issues, further strengthen our capital position.â€
On an underlying basis, Lloyds posted a profit of £6.2 billion last year, more than double the £2.5 billion it posted in 2012. Analysts had expected the bank to report an underlying profit of £5.8 billion.
In a further sign of its strengthening outlook, Mr. Horta-Osório said the bank intended to seek permission from the Prudential Regulation Authority, the financial regulator, to resume paying a dividend in the second half of the year. The bank expects the dividend payout ratio to be “at least 50 percent of sustainable earnings in the medium term.â€
“We are becoming a normal bank again,†Mr. Horta-Osório said on a conference call with the media.
The British government, which provided the Lloyds Banking Group with a £17 billion bailout during the financial crisis, holds a 33 percent stake after selling a 6 percent stake in September. Selling the government’s remaining holdings of Lloyds is a priority for George Osborne, the chancellor of the Exchequer.
Rising bonuses for bankers remain a controversial subject in Britain and across Europe.
The bonus pool at Lloyds increased to £395 million, up 8 percent from £365 million in the previous year. Lloyds said that represented about 6 percent of the bank’s underlying profit, down from a 12 percent level in 2012, and was smaller as a result of the charges it took related to payment protection insurance and other legacy issues.
Mr. Horta-Osório was awarded £1.7 million in shares, which will be deferred for five years and could be rescinded if Lloyds doesn’t meet its financial goals in that period.
On a conference call with journalists, Mr. Horta-Osório said that compensation should be linked to performance and he would accept the shares only if Lloyds had met additional conditions linked to its improving outlook, such as the British government selling at least half of its ownership in the bank.
Net interest income - the difference between revenue on the bank’s assets and expenses paid on its liabilities - rose 5 percent to £10.8 billion, up from £10.3 billion a year ago.
The bank’s core Tier 1 capital ratio, a measure of a bank’s ability to weather financial disturbances, rose to 10.3 percent, compared with 8.1 percent at the end of 2012.
