Lloyds Banking Group returns to profit

25 February 2011 8:38 am | By Natalie Holt

Lloyds Banking Group has made a return to profit for 2010, posting a £2.2bn pre-tax profit on a combined businesses basis.

This is up from the £6.3bn loss for 2009.

Statutory pre-tax profit was £281m compared to £1.04bn in 2009, although the 2009 figure was distorted by an £11.2bn accounting gain from the acquisition of HBOS in 2008.

Impairment charges, the money set aside for bad loans, fell 45 per cent from £24bn to £13.2bn.

Lloyds lent £30bn in gross mortgage lending and £49bn in gross lending to UK businesses, £11bn of which was to small and medium sized firms.

The bank says this means it will exceed the Government targets for mortgage and business lending for the year to February 28, 2011.

Lloyds adds that it is on track to meet its own target of £2bn in annual cost savings by the end of the year as a result of merging with HBOS.

The bank has reduced its balance sheet by £105bn in two years, and is aiming for a total £200bn reduction over five years.

Group chief executive Eric Daniels (pictured) says: “2010 was a good year for the group, in which we made significant progress, delivering a strong operating performance, while strengthening the business for the future.

“We achieved a step change in our financial performance despite modest economic growth, returning the group to profitability while absorbing the substantial costs of reducing risk in the business.”

The bank’s life, pensions and investment UK business, which includes Scottish Widows and Clerical Medical, reported a pre-tax profit and fair value unwind of £683m, up 11 per cent compared to 2009.

The profit takes into account a one-off charge of £70m, resulting from Lloyds’ decision to stop writing new payment protection insurance business.

New business for the whole insurance division fell 20 per cent from £13.5bn to £10.8bn, reflecting the 2009 withdrawal of HBOS legacy products with lower returns.

Total new business profit for UK life, pensions and investments rose 102 per cent from £135m to £267m.

Protection business excluding PPI was up 10 per cent from £519m to £574m. Savings and investment business fell 40 per cent from £2.7bn to £1.6bn.

Individual pensions business dropped 30 per cent from £2.3bn to £1.6bn, while corporate and other pensions business remained relatively flat at £2.8bn compared to £2.6bn.

Managed fund business rose 21 per cent from £146m to £177m.

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