Lloyds Bank (LLOY.L) announced a dividend and surprise acquisition on Thursday as it returned to half-year profitability
Shares rallied on the back of interim results that showed the worst impact of the COVID-19 pandemic appeared to be fading.
"We are beginning to see signs of an economic recovery. although uncertainty remains," interim chief executive Williams Chalmers said on a call with journalists.
The British lender on Thursday reported a pre-tax profit of £3.9bn on net income of £7.6bn in the first half of 2021. Analysts were expecting profits of £3.1bn on revenues of £7.35bn.
The healthy half-year profit compares with a loss of £602m made in the first six months of 2020. Like most banks, Lloyds set aside billions to cover a feared surge in bad debt linked to the pandemic, which pushed it into the red. A surge in losses has so far not materialised.
Lloyds unlocked £837m from its buffer due to the improving outlook in the UK, leading to a net half-year gain of £656m on provisions.
"During the first six months of 2021, the group has delivered a solid financial performance with continued business momentum, bolstered by an improved macroeconomic outlook for the UK," interim chief executive William Chalmers said in a statement.
Lloyds raised its forecasts for the UK economy and upped its guidance for performance next year. It now expects to deliver a return of equity of 10% next year.
The bank announced a 0.67p per share interim dividend, which was higher than analysts had expected.
Shares in the bank had rallied strongly in the run-up to results but ticked 0.8% higher on Thursday.
"While we are seeing clear progress in the vaccine roll out and emergence from lockdown restrictions, the coronavirus pandemic continues to have a significant impact on the people, businesses and communities of the UK," said Chalmers.
"In this context, the group remains committed to helping Britain recover from the pandemic and delivering for all stakeholders.”
Lloyds, Britain's biggest mortgage lender, has benefitted from a booming property market in the UK. Last month was the busiest ever recorded for home sales in Britain as the end of a temporary stamp duty holiday drove a surge in activity.
The bank said June was its biggest month for mortgage completions since 2008. Lloyd's mortgage book now stands at £12.6bn and it has lent £9bn to first-time buyers so far this year.
Lloyds' second-quarter profits were £2bn and net income was £3.9bn. Forecasts had pegged profits at £1.2bn and revenues at £3.7bn.
Lloyds announced a surprise acquisition alongside its half-year results. The bank said it would acquire investment and retirement platform Embark for £390m. The digital retirement group manages £35bn in assets on behalf of 410,000 customers.
“Through Embark’s technology, we will be able to increase the reach of our investment offerings for customers who are happy to manage their own portfolios, through modern, easy-to-use technology," Antonio Lorenzo, chief executive of Scottish Widows and group director of insurance and wealth at Lloyds Banking Group, said in a statement.
"We will also be able to enhance our intermediary proposition, strengthen our offering in retirement and modernise the way Scottish Widows works with advisers, recognising the continued value of advice.”
Numbers on Lloyds' performance come a day after rival Barclays (BARC.L) reported a quadrupling of profits and hiked its dividend. Barclays was boosted by record quarterly results at its investment bank and equities division, which offset weakness in consumer credit. Shares in Lloyds rallied 1% on Wednesday in the wake of Barclays' numbers.
Chalmers took temporary charge of the bank after the exit of long-time boss Antonio Horta-Osorio in April. Charlie Nunn will take over full time in mid-August, when Chalmers will move back to the role of chief financial officer.
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