Lloyds's `Good' 2010 Leaves Analysts Seeking More Detail
Lloyds Banking Group Plc, Britain’s biggest mortgage lender, forecast “good” 2010 results without disclosing figures, prompting calls for the government- controlled bank to match the financial reports of its peers.
The bank fell to the lowest level in two months, making it the worst performer in the five-member FTSE 350 Banks Index. Lloyds’s Chief Executive Officer Eric Daniels forecast a “good financial performance” for the full year as loan impairments continued to decline in the third quarter, according to a statement today.
“U.S. banks give profit and loss details, as do European banks,” said Joseph Dickerson, a banking analyst at Execution Noble Ltd. who has a “buy” rating on the stock. “It’s time to move into the 21st century.”
British banks have long reported first- and third-quarter results without providing actual numbers, unlike lenders in the U.S., continental Europe and India that provide detailed financial statements. The credit crisis spurred Royal Bank of Scotland Group Plc and Barclays Plc to break with tradition and issue quarterly financial reports.
“We see little point” to the Lloyds statement, said Hank Calenti, head of bank credit research at Societe Generale SA. “Today’s contained a grand total of nine numbers, excluding repetitions,” he said, adding that there was “nothing of value to trade on in this report.”
The absence of detail was “slightly frustrating,” said Mike Trippitt, an analyst at Oriel Securities Ltd. in London who has a “buy” rating on the stock.
‘Trends in the Business’
Lloyds issued more detailed figures for the third quarter of 2009 because the bank was raising capital, Daniels told reporters. The lender raised 13.5 billion pounds ($21.6 billion) in the U.K.’s largest rights offering last year. It is 41 percent owned by British taxpayers after a bailout in 2008. U.K. Financial Investments Ltd., which manages the government’s bank stakes, didn’t immediately respond to a call seeking comment.
“This year, clearly, the numbers are not audited and won’t be until the year end,” said Daniels, 59. “What we are doing is giving an update for the third quarter. We are doing exactly as we should be doing which is saying what the trends are in the business and how we feel about it generally. That’s the purpose of today’s announcement.”
Lloyds isn’t an investment bank and is not subject to the “substantial quarterly ups and downs driven by movements in levels of trading,” Finance Director Tim Tookey said.
“We will deliver a good financial performance for the current financial year,” Daniels said in the statement. “Impairments for the second half are expected to fall moderately from the first half,” the statement said. The bank provided no figures.
Declines in impairments at its U.K. consumer unit have been offset in part by “ongoing difficulties” in its Irish and Australian businesses, the bank said. The bank may have “a few hundreds of millions” in charges relating to its operation in Australia, said Tookey.
Provisions were 6.56 billion pounds in the first six months of 2010, compared with 13.4 billion pounds in the year-earlier period, the bank said in August.
Lloyds, Britain’s second-biggest taxpayer-aided bank, was helped in the first half of the year by a recovery in residential and commercial property prices, which caused a reduction in the number of bad loans. That recovery has now stalled, with U.K. house prices tumbling the most in 20 months in October, property researcher Hometrack Ltd. said in a report yesterday.
Lloyds said it expected to see “continued improvement” in its net interest margin in the second half of the year after reporting a 2.08 percent margin in the first six months, driven by higher asset pricing and as mortgage customers were moved onto higher interest rates.
Due to improved access to the bond markets the bank has “voluntarily” repaid 7 billion pounds to central banks, Daniels told reporters.
Lloyds has less than 120 billion pounds of central bank and government funding, compared with 132 billion pounds in the first half, Tookey told analysts today.
The bank raised more than the 25 billion pounds of funding it planned for the whole year by the end of September, the statement said.
“This is an unequivocal positive for the credit profile of Lloyds and should serve to bring down wholesale funding costs,” Execution Noble’s Dickerson said.
Lloyds made progress in reducing its balance sheet and remained “on track” to achieve a reduction of 200 billion pounds by 2014, according to the statement.
Lloyds dropped 3.2 percent to 67.39 pence at the close of trading in London, the lowest since Aug. 25. The bank has gained 33 percent this year.
The Lloyds statement “is a good backdrop for the U.K. banks reporting season,” Michael Helsby, an analyst at Bank of America Corp. in London who rates Lloyds a “buy,” said in a note today. “U.K. bad debts appear to be improving quicker than expected, and margins continue to rise.”
RBS and HSBC Holdings Plc are scheduled to report third- quarter figures on Nov. 5.
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