Lloyds TSB holds dividend as profits take 18% hit

LLOYDS TSB Group plc held its final dividend yesterday despite an 18% profit drop, but shares in Britain’s fourth-biggest bank lost ground as investors fretted about its future dividend policy.

The worst stock market slump in 30 years has hammered global financial stocks, raising fears about the capital strength of banks and insurers. Lloyds warned of tough market conditions as it unveiled lower profits that were just below market consensus.

The bank kept its final dividend at 23.5 pence, however, for an increase of 1.5% in the total 2002

dividend to 34.2 pence. Some analysts described it as a farewell gift to shareholders from outgoing chief executive Peter Ellwood, who will be replaced by internal executive Eric Daniels this year.

Many feared Lloyds might cut the dividend to preserve cash for its life insurer Scottish Widows, which is under pressure from falling stock markets.

Lloyds shares initially rose as much as 4% to 448-1/2 pence but then shed gains to trade down 3.2% at 417-1/2 pence in late morning trade. The DJ Stoxx European bank sector was up 0.7%.

Pre-tax profits for the year ended December fell to £2.607 billion from £3.161bn a year earlier. The profits fall was due mainly to higher bad debt provisions, which surged 38%. Analysts had forecast profits between £2.076-2.867 billion, with a consensus at £2.725bn.