Lloyds profits boosted as it claws back £459m set aside to cover COVID-19 losses

Apr 28, 2021

Lloyds Banking Group’s quarterly profits have surged to £1.9bn as the improving economic outlook saw it claw back £459m set aside for loans turning sour.

The earnings for the first three months of the year compare to a bottom line figure of just £74m a year ago as the group – which includes Lloyds Bank as well as Halifax Bank of Scotland – started to make provision for the COVID-19 crisis.

Lloyds also said mortgages were up by £6bn over the period with March seeing the highest level of completions on home loans since 2008.

The results reflect trends also reported by rival HSBC a day earlier, with income squeezed by low interest rates but the bank’s bottom line boosted by the release of some of the billions put aside to weather the pandemic.

Lloyds said it now expects the UK economy to see 5% growth in 2021, against a previous expectation of 3%, while it also believes unemployment will peak at 7%, not 8%

The bank said the improved economic outlook partly reflected the impact of the extension of the government’s furlough scheme, which has been subsidising the wages of workers temporarily laid off because of the virus.

But it said the “expected credit loss” allowance of £6.2bn that it still has set aside remains “high by historical standards”.

“It assumes that a large proportion of expected losses will crystallise over the next 12 to 18 months as support measures subside and unemployment increases,” the bank said.

Antonio Horta-Osorio, the group’s chief executive, said: “The coronavirus pandemic continues to have a significant impact on people, businesses and communities in the UK and around the world.

“Whilst we are seeing positive signs, notably the progress of the vaccine roll-out and the emergence from lockdown restrictions, the outlook remains uncertain.”

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