The figures showed that that rise in pre-tax profits was largely driven by the number of customers who moved to its high-margin standard variable mortgage rate, which now makes up just under half its mortgage clients. It also managed to repay £61bn of the £132bn it borrowed from UK taxpayers during last year, and while it still owes £83bn, it added that since the beginning of this year, it’s managed to pay off another £13bn. Not a bad result.
The other good news was that the cost of bad loans also fell, from £23bn to £13bn – so a bit of encouragement for shareholders there. But that’s not the whole story. Economic problems in Ireland led impairment charges on its loan book in the country, which makes up about 2% of its total asset base, to rise by £1.3bn to £4.3bn. Issues in the property market there also caused problems, and it’s expecting the market to fall by another 5% during 2011.
Lower overdraft charges and changes in fees also took their toll, causing income from charges to drop by 11%, to £1.6bn. And the bank slipped in that it’s planning to shrink its balance sheets, which will mean – you guessed it – fewer loans next year. Which businesses won’t be too pleased about.
All this will inevitably lead to questions over whether Daniels is worth the £1.45m bonus the bank has offered him when he makes his big departure on Monday. The payment is deferred until 2013 (by which time, presumably, the bank hopes the furore over bonuses will have died down) and Daniels says he hasn’t decided whether or not to take it up, yet.
Not terribly encouraging, though, that Lloyds was the biggest loser on the London Stock Exchange when it interrupted trading this morning. Shares in the bank had slipped by almost 5% when a computer glitch sent the bourse offline for several hours. It’s prompted questions over whether some trades will need to be cancelled – although the LSE says that probably won’t happen. The latest news is that the stock exchange is back in action – although given that more gloomy data about the UK economy was released during the outage period, chances are there are some investors who wish it wasn’t…