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Lloyds TSB profit before tax plummets 70%

Lloyds TSB has seen its statutory profit before tax plummet by 70 per cent to £599m in the first half of the year, down from £1,993m at the same period last year.

It says its strong underlying business performance was offset largely by the impact of market dislocation and adverse volatility relating to the group’s insurance business.

Its profit before tax, on a continuing businesses basis, decreased by 19 per cent to £1,573m reflecting the impact of £585m of market dislocation. Excluding this impact, profit before tax increased by 11 per cent to £2,158m.

However, the bank saw a huge increase in its share of net new lending, taking 24.4 per cent of new mortgages this year compared to just 8.9 per cent in the same period last year.

This increased group balances to £109bn with an average new loan to value ratio of 63 per cent.

Gross new mortgage lending for the group increased by 5 per cent to £16.8bn, up from £16bn in the first half of 2007.

This will see its share of gross lending jump to 11.3 per cent, compared to 9 per cent last year.

Group chief executive J Eric Daniels says: “While we continue to deliver a strong operating and financial performance, there is no doubt that we are entering a period of lower growth for the UK economy. Bank deleveraging and declining property valuations have impacted consumer confidence and contributed to lower growth.

“The business plans that we adopted last year were based on our assumption that the economy would slow in 2008, and were consistent with our business model which takes a prudent, through the cycle approach to risk. As a result, we have not needed to materially revise our strategy in light of the recent economic trends.”

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