Lloyds results reveal lower debt sales and recoveries

Lloyds’ financials for the six months to June 30, published this morning (August 1), state that Lloyds’ impairment charge increase, along with an asset quality ratio rise of 11 basis points to 27, both reflect “lower debt sales and recoveries and the inclusion of MBNA”.

The bank posted a more granular impairment charge, in credit cards, loans and overdrafts, of £386m for the first half of the year. This increased by £213m in the six months to June 30.

Lloyds said this was mainly due to the consolidation of MBNA and a lower level of debt sales in the period, and less cash collected in recoveries as a result of previous sales.

The group also made a PPI provision of £550m in the first half of 2018, which included an extra £460m in the second quarter. This charge covers the fact that Lloyds now expects to receive 13,000 PPI claims each week until the deadline in August 2019. The bank currently has a total outstanding PPI provision of £2.bn on the balance sheet.

As at June 30, Lloyds had credit card balances of £18.5bn, UK motor finance balances of £13.9bn and loan volumes of £7.8bn.

The group expects credit losses of just under £1.5bn in secured lending and just over £1bn in unsecured.

On its credit risk outlook, Lloyds said its underlying credit portfolio “remains stable” with no overall deterioration in credit risk indicators.

The bank added that it’s continuing with low-risk consumer lending and a prime credit card book. The results indicate that volumes of new customers coming into arrears in credit cards has been falling steadily, and MBNA is “performing in line with expectations”. MBNA’s integration is expected to complete ahead of schedule in the first quarter of 2019.

In its retail division, Lloyds reported a total 190m of costs due to “market volatility and other items”, which included a £105m loss on the sale of an Irish mortgage portfolio. The whole group also took a hit of £197m in “remediation costs”.

Digital advancement
Although the bank recently announced the closure of 49 branches, Lloyds is seeing growth in its digital offering, claiming that it now has the largest digital bank in the UK, with 13.8 million digitally active customers and 9.8 million mobile users.

The group claimed it is the “only major UK bank compliant with the Open Banking industry deadline.”

On technology, Lloyds is enhancing its machine learning capabilities, resulting in 56 percent accuracy improvements in forecasting for its savings solution. Automation has also released about 115,000 staff hours across multiple areas.