Lloyds TSB shrugs off 17% drop in profits

Lloyds TSB said today it had produced a “satisfactory” underlying performance for 2002 despite suffering a 17% fall in pre-tax profits.

The bank, Britain’s fifth-largest, blamed the slump on significant stock market turbulence and uncertainty in global economies but said its core businesses continued to perform well.

Customer lending and deposits grew and the bank enjoyed some market share gains in areas including personal loans and credit cards.

Lloyds TSB also said it had made “rigorous” cost controls during the year, including cutting its employee head count by 4,000.

Provisions for bad debts, which many of the UK’s banks have been forced to set aside, included £50m in respect of Lloyds TSB’s business in Argentina.

The bank also increased provisions for certain undisclosed US corporate customers “as a result of their accounting and other irregularities”.

Falling world stock markets have put Lloyds TBS’s life assurance arm Scottish Widows under pressure along with its UK rivals.

However, the bank said long-term growth prospects for the life unit were good.

“The long-term winners will be those with extensive customer franchises and distribution reach, augmented by economies of scale and strong brand power,” the group said in a statement.

The bank added that Scottish Widows remained sufficiently capitalised to be able to withstand further stock market falls without an injection of cash to prop up its balance sheet.

Lloyds TSB said it will only consider making a cash injection to the life business if the FTSE 100 Index of leading shares falls below the 3,000 point, and then the investment would be unlikely to exceed £300m.

Despite the decline in group profits, Lloyds TSB raised the final dividend for shareholders by 1.5%.