Lloyds set to merge consumer finance unit earnings with retail

Bloomberg

Lloyds Banking Group Plc is changing the way it reports some of its key numbers ahead of its annual results next month. The earnings of the consumer finance unit, whose assets increased by 12 percent to 39.2 billion pounds ($54.8 billion) in 2016, will be merged with the retail division, according to a memo sent to investors and seen by Bloomberg News. During 2016, the bank had average assets of 303 billion pounds in its bigger retail unit.
The changes were “implemented to align and strengthen the group’s organisational structure” after the revamp announced in July, Lloyds said in the memo, referring to an earlier management reshuffle. A spokeswoman at the bank declined to comment.
The new reporting structure may make it harder for investors to see whether the consumer finance unit has suffered a deterioration in credit quality, or build-up of bad loans. Britain’s largest mortgage lender has grown in riskier consumer credit with the acquisition of Bank of America Corp.’s MBNA U.K card business for 1.9 billion pounds in 2016, while its Black Horse motor finance arm has also boosted assets.
The changes come days after the Bank of England told banks in a letter that there are “weaknesses” in how they assess risks from consumer credit, and that it found that certain lenders do not give their boards good enough data to properly oversee potential threats. Consumer credit increased by about 10 percent in the year to September 2017, according to a BOE report in November, raising concerns about the pace of growth.
In an attempt to reassures investors over the robustness of the car finance division, Lloyds Chief Financial Officer George Culmer said in a call after the third-quarter results the bank monitors “the hell out of this.”