BRITAIN’S biggest retail bank has recorded £3.9 billion profit for the half-year to June 30, 2021 after losses a year ago, boosted by the release of funds previously set aside to cover potential bad loans linked to the pandemic.
Bank of Scotland owner Lloyds Banking Group, which also unveiled plans to buy Dundee-based savings and pensions firm Embark for about £390 million, said that its “solid” performance – ahead of analysts’ forecasts – reflected the improved economic outlook for the UK in the first six months of 2021.
Lloyds also announced a 0.67 pence interim dividend.
William Chalmers, interim group chief executive until new CEO Charlie Nunn arrives next month, said: “During the first six months of 2021, the group has delivered a solid financial performance with continued business momentum, bolstered by an improved macroeconomic outlook for the UK.”
However, he warned that while there was clear progress in the vaccine rollout and emergence from lockdown restrictions, the coronavirus pandemic continues to have a significant impact on the people, businesses and communities of the UK.
“The outlook remains uncertain,” he noted.
Lloyds, which owns the Scottish Widows pensions brand, said that the acquisition of the wealth management platform Embark acquisition, one of its biggest since returning to full private ownership in 2017, will see it add 410,000 customers and £35bn of assets under administration.
Antonio Lorenzo, chief executive of Scottish Widows and group director for insurance and wealth at Lloyds, noted: “There’s an ever-growing customer demand for clear, simple and affordable financial planning and retirement products and services, and our acquisition of Embark will enable us to enhance our intermediary proposition and, modernise the way Scottish Widows works with intermediaries, recognising the continued value of advice.”
A senior investment manager at Brewin Dolphin, Donald Brown, pointed out that while Lloyds is the most exposed of the major banks to the UK economy, it is backed by a strong balance sheet and taking measures to solidify its position and build for the future. “Lloyds’ results build on Barclays’ the day before, with many of the same themes pointing to a banking sector on the road to recovery – significantly higher profits, lowering provisions for bad loans, and a generally more positive outlook on UK plc.
“The increase to the dividend is another step in the right direction for income investors, while the acquisition of digital savings group Embark will also add to the diversification of the bank’s offering for new and existing customers.”
At the Scottish Investment Trust, fund manager Alasdair McKinnon noted: “The most welcome news from Lloyds was the reintroduction of an interim dividend. Although only 0.67p per share, this was more than the market had been expecting and provides a good marker for what might be paid to shareholders for the full year.
“The health of the UK economy is key to future profitability of Lloyds, as evidenced by the write-back of bad debt provisions made in the first half of the year. Assuming the benign conditions continue, Lloyds is well placed to make hay, allowing them to return cash to shareholders through a combination of progressive dividends and share buybacks.”