Lloyds profit jumps while missold insurance costs linger

Bloomberg

Lloyds Banking Group Plc is quickly gaining earnings momentum, but is still looking over its shoulder to clean up its troubled past.
Britain’s largest mortgage lender posted a 23 percent jump in pretax profit for the second quarter, beating analyst estimates, and also upgraded its financial guidance for the full year. It’s also taking a
460 million-pound charge ($602 million) to compensate customers for improperly sold loan insurance, Lloyds said in its earnings statement.
“The only notable fly in the ointment” is a further payment protection insurance provision taken during the second quarter, said Gary Greenwood, an analyst at Shore Capital, in a note to investors. “Overall, we expect this statement to be taken positively by the market.”
After restoring the bank to full private ownership, CEO
Antonio Horta-Osorio is investing 3 billion pounds to boost technology and income from insurance and retirement products, while striving to keep a lid on expenses.
Lloyds is aiming for a cost-to-income ratio in the low 40s, which would make it one of the most efficient European banks.
Lloyds said pretax profit climbed to 1.52 billion pounds in the second quarter from 1.24 billion pounds a year ago. Net interest income climbed just under 6 percent to 3.17 billion pounds for the quarter.
The latest PPI top-up in the second quarter raises the total set aside for the scandal by the London-based bank to more than 19 billion pounds. Analysts at Morgan Stanley expected a charge of 410 million pounds for the second quarter, according to a note.
Lenders in the UK have already set aside almost 40 billion pounds to compensate customers who were improperly sold payment protection insurance, with Lloyds paying out the most so far.