Lloyds TSB 'on track' for earnings target

Lloyds TSB today said it was on track to make further earnings progress in 2005 despite becoming the latest bank in the UK to report a slowdown in consumer borrowing.

Lloyds said it continued to deliver good earnings momentum and expected to turn in a satisfactory trading performance for the year to December 31.

It said its retail bank continued to make progress in profitable franchise development despite some slowdown in the demand for consumer credit.

Last week, Royal Bank of Scotland and HSBC both said they had witnessed a weakening in lending to consumers.

Lloyds also said it would set aside an extra £110m (€158m) to cover any ongoing liabilities relating to past sales and performance of endowment policies.

“Despite this provision, Lloyds TSB expects to report earnings broadly in line with current market expectations,” it said.

Lloyds said last month that it planned to transfer up to 1,000 jobs from the UK to India by the end of next year.

The group said it was confident it could achieve the transfers through natural wastage and redeployment of UK staff to other roles.

In July, it blamed the sale of overseas businesses for a 7% fall in half-year profits to £1.56bn (€2.25bn).

The result – in line with market expectations – masked a solid performance in the UK, where key product areas such as mortgages and credit card balances grew strongly.

Today, Lloyds said an expected lower net interest margin had partly offset good growth in its lending portfolios, although the rate of margin erosion had reduced since the first half.

Its Scottish Widows arm had continued to refocus its products towards more profitable and capital efficient products and had launched a new range of products more tailored to the branch distribution network during the last few months.

“Scottish Widows remains well capitalised and on track to pay a 2004 dividend to Lloyds TSB,” the group said.

All main businesses within the bank’s wholesale and international banking division continued to perform well and a good increase in profitable new business in corporate businesses, business banking and asset finance had been achieved, it said.

The company’s cost performance continued to be strong and further improvements in processing quality had been made throughout the business.

“The group continues to deliver revenue growth in excess of cost growth in each division,” it said.