Lloyds bank books $1.75 billion loan charge

Bloomberg

Lloyds Banking Group Plc has begun to count the cost of the coronavirus pandemic to the British economy — and warned that the turmoil had made its old targets obsolete.
Britain’s biggest mortgage lender booked a provision of 1.4 billion pounds ($1.75 billion) for possible soured loans as efforts to halt the spread of the virus crushed the economy. Lloyds also scrapped its previous targets, saying in a statement that the upheaval of the pandemic, which has led to widespread interest rate cuts, meant its guidance was no longer appropriate. Pretax profits in the quarter plunged 95% to 74 million pounds.
“The economic outlook is clearly challenging with the longer-term outcome dependent on the severity and length of the pandemic,” said Chief Executive Officer Antonio Horta-Osorio. Senior staff will not get cash bonuses for the rest of 2020, the bank said.
The provision comes a day after rival Barclays Plc announced an unexpectedly large 2.1 billion-pound charge to cover soured loans, as banks around the world prepare for more struggling borrowers during lockdown. UK regulators have urged banks to be flexible in their accounting to keep credit flowing, as government aid programs support millions of households and businesses.
One in nine UK mortgages are on payment holidays, according to analysts at JPMorgan Chase & Co. Lloyds said 880,000 of its customers had received some relief across all forms of loan. This level of support poses an unprecedented challenge for banks trying to estimate loan losses.