The Lloyds Banking Group dropped to a pre-tax loss of £ 602m in the first half of the year, warning investors that the impact of the pandemic was "more profound" and "much larger" than expected.
The lender has provided £ 3.8 billion for a flood of bad debts expected to come after the holiday ends. There is more mass job cuts and consumers and businesses are feeling the full force of the economic consequences of the crisis.
City insiders had expected the bank to post a loss of £ 30m instead of over £ 600m and a year ago the group had posted a profit of £ 2.9bn.
Like other major banks, including Barclays and Santander, Lloyds said that his help to individuals and businesses during the pandemic would weigh on corporate earnings.
Annual loss: Lloyds Banking Group had a pre-tax loss of £ 602m last year
The amount of cash earmarked for bad debts is £ 1 billion above analysts' expectations.
Lloyds said his outlook for the year remained "highly uncertain" and warned that the effects of lower interest rates and economic fragility would continue at least for the rest of the year. "
Lloyds' shares, which are listed on the FTSE-100, fell sharply this morning and are currently falling 6.5 percent, or 1.83 pence, to 26.54 pence. A year ago, the share price was closer to the 55.00 pence mark.
Lloyds announced that it has granted residential customers over 1.1 million vacation days. Around 33,000 capital repayment holidays have been made available to small businesses and other businesses to help them alleviate the temporary financial pressures.
Payment holidays for private customers were granted to people with mortgages, loans, cards and car financing transactions with the bank.
The group announced that it has provided over £ 9bn in loans to businesses and commercial customers through government-sponsored programs, including bounce-back, Coronavirus Business Interruption Loan and Coronavirus Large Business Interruption Loan programs.
Lloyds, which is often seen as a pioneer for the UK economy as one of the most domestically focused banks, expects the impairment to fall between $ 4.5 billion and $ 5.5 billion by the end of the fiscal year. GBP will be.
The amount of cash held by Lloyd's customers in the first half of the year increased by £ 29bn and £ 13bn in the first quarter, partly due to lower consumer spending during the closure.
Leader António Horta-Osório said: “The impact of the coronavirus pandemic in the first half of 2020 will have a profound impact on our lives and the global economy. Working with the government and our regulators, we remain fully focused on helping our clients and the UK economy recover. & # 39;
Lloyds’s chief António Horta-Osório said: "The effects of the coronavirus pandemic in the first half of 2020 will have a profound impact on our lives and the global economy."
He added: & # 39; Although the outlook is uncertain, the group's financial strength and business model enable us to help the UK recover and contribute to our country's return to prosperity.
& # 39; Our customer-focused strategic plan remains fully aligned with the Group's long-term strategic goals, the position of our franchise and the interests of the shareholders. & # 39;
Lloyds is looking for a new CEO to deal with the economic consequences of the pandemic after Horta-Osório announced earlier this month that he would step down after a decade.
In agreement with other banks, Lloyds informed shareholders on March 31 that they would not receive dividend payments this year. Today Lloyds said: & # 39; The Board of Directors will decide on 2020 dividend distributions or share buybacks in accordance with the approved dividend policy.
Payment vacation: Barclays also announced that it had vacationed 157,000 credit cards, 106,000 credits and 121,000 mortgages during the pandemic
Donald Brown, senior investment manager at Brewin Dolphin, said: & # 39; Lloyds & # 39; Pre-tax loss is worse than analysts' expectations and, like Barclays, had to put aside large amounts of capital earlier in the week to offset the potential impact of Covid-19 in its credit book, with bad debt losses expected to grow significantly.
& # 39; However, the bank is well capitalized and has strong liquidity and increased customer deposits, giving it the opportunity to lend for the recovery, with the potential to support longer-term growth.
& # 39; Of all the major banks, Lloyds is most exposed to the performance of the UK economy, which poses its own challenges – not least the influence of Brexit, which is still taking shape in the background. Still, the bottom line of the explanation is grim as the bank is looking for a new CEO to move the group forward. & # 39;
A sector under pressure
Major banks across Europe counted the cost of likely bad loans due to the pandemic this week, and Santander has created additional provisions to prepare for a flood of bad debts.
Lloyds' domestic rival, Barclays, also set aside £ 3.7 billion in the first half of the year as it prepares for a lot of bad debts that are expected to occur later this year.
Earlier this week, Barclays announced that it had spent vacation leave on 157,000 credit cards, 106,000 loans and 121,000 mortgages on a total of £ 16.2 billion in loans.
Big Loss: This week, Santander posted its first quarterly loss in its 163-year history
On Wednesday, Spanish lender Santander reported the first quarterly loss in its 163-year history of EUR 11.1 billion, reflecting both impairment of the loan and impairment of some assets.
Britain's third-largest mortgage lender Santander UK announced in its half-year results that more than a fifth of mortgage borrowers, a total of 239,000, applied for three-month breaks for home loans totaling £ 37.1 billion.
However, the number of customers still on payment vacation had dropped to 7 percent by July 15, the bank said, as thousands did not take the option of another three-month break and instead started repaying again.
Ana Botin, CEO of Santander, said: “The past six months have been one of the greatest challenges in our history. The impact of the pandemic has put us all to the test and I'm proud of how Santander reacted. & # 39;
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