Lloyds TSB's profits up 4%

Lloyds TSB's profits up 4%

	Published : Sat, 25 Feb 2006 16:25 By : Andrew Stead Print this Story

LONDON: U.K. bank Lloyds TSB posted an unexpected 4 per cent rise in its underlying 2005 profits, with its wholesale and international banking operations performing well, the bank said Friday.

The bank, Britain's fifth largest, reported a pretax profit of 3.47 billion pounds, up from 3.32 billion pounds in 2004, beating analysts' expectations. However, its U.K. retail operations suffered because of continued rise in bad debts, though the shortfall on this account was offset by the stronger wholesale and international operations. The bank said it will now plan to enter new markets once earnings in the retail banking sector revived.

Lloyds said the retail banking profit after provisions fell 7 per cent to 1.53 billion pounds with increased provisions for bad debts at 150 million pounds from 100 million. Profit in wholesale business and international banking rose 20 per cent to 1.5 billion pounds, while profit in insurance and investments after provisions rose 3 per cent to 798 million.

Its revenue (net of insurance claims) grew 9 per cent to 10.54 billion pounds. Chief executive Eric Daniels said this marks a 7 per cent rise and it has been the fastest in six years

The bank expects a further fall in its retail credit environment in the first half of 2006. However, the situation is poised to improve in the second half.

Daniels said he was not satisfied with the U.K. retail banking performance, but said the bank had repositioned itself and there were signs of improvement.

Costs rose by 4 per cent, but lower than the revenue growth -- improving the ratio of costs to income to 52.7 per cent from 54.3 percent.

The bank said the pension funds deficit stood at 2.91 billion pounds at the end of 2005. It is in discussions with the trustees of the funds and will come out with plans in about a month's time to reduce the deficit.

Helen Weir, the bank's finance director, indicated that the bank may bring in 500 million pounds in cash into the two funds servicing 70,000 members, without damaging the bank's financial strength.

The bank has been rumoured to be a target of acquisition, and Spain's Banco Bilbao Vizcaya Argentaria and U.S. banks Bank of America and Wells Fargo are named as potential suitors. The bank has refused to be drawn into any discussions on this issue.

Lloyds maintained its dividend, making a final payout of 23.5 pence a share to give a total of 34.2 pence for 2005.

The bank's shares went up 5.1 per cent to 568-3/4 pence, valuing the bank at 32 billion pounds.