So what’s gone wrong? Well, total income levels for the period fell by 15% to £15.3bn, which suggests that it’s simply not getting as much businesses as it was. That pushed underlying profits down by 6%, to £1.936bn by its preferred measure (doesn’t sound very preferable to us…). On the more positive side, though, it added that over the past three months, it reduced its non-core assets by £11bn to £151.4bn, reducing its exposure to bad debts by 22%. And it’s on-track to meet the lending targets it agreed with the Government as part of Project Merlin: in the last nine months, Lloyds has apparently lent £32bn to businesses, of which £9.6bn went to SMEs.
It’s unquestionably been a tough year for banks, what with those PPI fines, and a stubbornly low base rate, which has given them little chance to raise their margins. But at Lloyds, there’s also indication of a cultural failing.
An anonymous former senior executive of the company fans the flames in today’s Telegraph, explaining that Lloyds’ reaction to the previous recession was to become strongly risk-averse, which ‘saps the energy and enthusiasm of even the keenest staff’. ‘If some mad professor wanted to conduct a cruel experiment in the psychology of stress, he couldn’t do better than to replicate the corporate culture of Lloyds Banking Group,’ he/she/it explains. ‘If a decision had to be made, then it was best to reduce the risk by getting "sign-off" from as many other people… as possible.’ So boss Horta-Osorio probably isn’t the only one suffering stress…
No doubt, some of that is to do with the fact that the bank is 41% owned by the Government – which is, presumably, keen to ensure Lloyds doesn’t return to its former, risk-loving self, thus minimising any risk of a second bailout. But of course, any fall in profitability will mean the Government is forced to put off selling its shares. So this risk-aversion could end up costing us all dear.