Lloyds bolsters digital banking armoury as half-year profits hit £3.9bn

Lloyds Banking Group has credited an improving economy for a recovery in half-year profits, aided by a big cut in earlier provisions for coronavirus crisis bad loans.

The bank, like Barclays a day earlier, revealed it had unwound hundreds of millions of pounds worth of charges imposed last year on fears the COVID-19 pandemic would result in a deluge of defaults.

It released a total of £837m during the first half of the year, boosting its bottom line.

Pre-tax profits for the six months to the end of June came in at £3.9bn, Lloyds said, following losses of £602m during the same period last year.

The bank also confirmed a story by Sky News on Wednesday that it was to bolster its digital banking operations through the acquisition of Embark.

The online savings and pensions operator would cost just shy of £400m, Lloyds said, making it the biggest deal of its kind for the bank since its return to full private ownership four years ago.

It has blamed high demand for online services for years of cutbacks to branches – with the latest closures revealed only last month.

Lloyds said that the deal would give it 410,000 new customers.

Lloyds credited the UK economic recovery and a surge in mortgage deals – albeit at crisis-low rates – for upgrading its outlook.

Lending increased by £7.5bn, the bank said.

But its results were weighed down by £425m of “remediation charges”, including compensation for historic fraud at its HBOS Reading branch and a previously disclosed fine for misleading insurance customers.

Interim chief executive William Chalmers, who is leading the bank until new boss Charlie Nunn arrives next month following the departure of Antonio Horta-Osorio, said: “During the first six months of 2021, the group has delivered a solid financial performance with continued business momentum, bolstered by an improved macroeconomic outlook for the UK.

“While we are seeing clear progress in the vaccine rollout and emergence from lockdown restrictions, the coronavirus pandemic continues to have a significant impact on the people, businesses and communities of the UK.”

Shares were up by more than 1%.

Freetrade analyst Gemma Boothroyd said of the Embark deal: “Today’s half-year results show the bank’s not reeling in the interest like it used to.

“Lloyds is banking on headlines of its biggest acquisition since going private in 2017 to glaze over a 33% decline in net interest income.

“It’s not that Embark won’t necessarily pan out for Lloyds. Expanding into digital pensions will bolster the bank’s self-directed wealth offering.

“As the wave of consolidation continues to ripple across the sector, going digital has become a lifeline for the UK’s biggest banks. But ‘digital’ can become a stale buzzword pretty fast if not done right.”

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