Lloyds warned of a long, hard economic recovery and set aside an extra £375 million (€458.22m) to compensate people mis-sold insurance, underscoring the challenge facing Britain’s banks as they battle to recover from financial crisis.
Lloyds, 40% owned by the government after a bailout during the 2008 crisis, said it was making progress in reducing its loan book, cutting costs and reining in bad debts — all key parts of its recovery plan.
But its planned sale of 632 branches is dragging on, highlighting the tough market facing sellers of British banking assets, and it struck a downbeat tone about the UK economy, which tipped back into recession last quarter.
“We think that the economy will be reasonably flat this year, but it is going to be a long and difficult recovery,” chief executive Antonio Horta-Osorio said.
Lloyds said it made a first-quarter statutory pretax profit of £288 million, down from £316 million in the previous quarter, but significantly better than a £3.5bn loss in the first quarter of 2011.
Bad debts fell 36% from a year ago to £1.7bn and the bank cut its non-core assets by £12.4bn in the quarter, shrinking its bad loans faster than expected.
Britain’s biggest retail bank in terms of customers reported a surge in compensation claims for Payment Protection Insurance (PPI) mis-selling in February and March.