Lloyds takes £660m hit from TSB sale

1st May 2015


The sale of TSB has triggered a £660 million charge for Lloyds and pushed profits to fall 11% in the first quarter.


The £1.7 billion sale of TSB means Lloyds has reported a Q1 profit decline despite rising revenues. TSB is being sold to Spanish bank Banco Sabadell and the deal means Lloyds has to pay a £450 million for moving IT platforms and future IT licencing revenues, taking the total charge to £660 million.


Lloyds chief executive Antonio Horta-Osorio said the bank would pay a half-year and a full-year dividend in 2015, which is good news for shareholders in the bailed-out bank who have gone without a pay-out for a number of years.


Profits for the first three months of the year at Lloyds was down £155 million to £1.2 billion but underlying profits increased 21% to £2.2 billion and the bank reported lower costs.


‘We have made a strong start to the next phase of our strategy as we continue to support and benefit from UK economic growth,’ said Horta-Osorio.


‘I am pleased with the continued improvement in financial strength and performance in the first quarter and expect our plan to deliver sustainable growth and improved returns.’


The return to higher-paying dividends, after a token dividend payment last year, will be good news for chancellor George Osborne should he return to government after the election.


He has said that under a Conservative government there will be a £4 billion retail offering of Lloyds shares as part of the government’s plan to reduce its stake in the bank. The taxpayers owned 41% of Lloyds in 2008 following the financial crisis but today own 21%.


Gary Greenwood, analyst at Shore Capital, said he expected Lloyds share to ‘react positively’ this morning but that the election brought its own woes.

‘The potential for a further material share price strength may be limited by market concerns about the outcome of the election – Labour or Labour led coalition likely to be a more challenging outcome for banks than a Conservative or Conservative led coalition, in our view; the potential outcome  of the [competition authority] review into retail and SME banking due to report next year; and the stock overhang from the ongoing sell down of the government’s now c.20% stake in the company – noting that the Conservative Party are proposing a retail placing at a discount of at least 5%,’ he said.

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