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May 6, 2008

Lloyds upbeat on capital ratio and profit

by Gill Montia

Story link: Lloyds upbeat on capital ratio and profit

Lloyds TSB has issued an upbeat trading statement on its performance in the first quarter of the year, despite having written down a further £387 million at its wholesale and international banking units (£200 million of which related to indirect exposure to the US sub-prime mortgage crisis).

Last year, the group wrote down a mere £280 million in credit crunch related losses. The sum reflects the fact that it has had no direct exposure to US sub-prime mortgage asset backed securities.

The bank has reassured investors that it will not be following Royal Bank of Scotland and HBOS in a rights issue because its capital position is more than adequate. In addition, inflows from its retail and corporate businesses remained strong in the first quarter.

In the first three months of the year growth in pre-tax profit was in double digits and the group (which owns Cheltenham & Gloucester) improved its market share of new mortgage lending.

Eric Daniels, Lloyds TSB chief executive, confirmed that the bank’s strong capital position had enabled it to raising wholesale funding at market leading rates, giving it a competitive advantage.

Results for the full year are expected to be in line with previous forecasts of high single digit to low double-digit growth.

Finally the group confirmed that it is on target to achieve cost reductions of around £250 million this year.

 

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