Lloyds profits plunge after £4.2bn put aside for Covid defaults

Profits at Lloyds Banking Group have plunged 72% after the bank was forced to put aside more than £4bn to protect itself from a potential jump in defaults linked to the Covid crisis.

Lloyds, which also runs the Halifax and Bank of Scotland brands, reported pre-tax profits of £1.2bn for 2020, down from £4.4bn a year earlier. However, that is higher than the £905m analysts had forecast.

The drop was down to a surge in provisions for losses linked to loans that will not be repaid. The bank set aside £4.2bn to cover the potential defaults, compared with £1.3bn in 2019.

Lloyds has become the latest UK lender to resume dividend payments despite the drop in profits, with plans to pay shareholders a combined £404m at 0.57p per share. The Bank of England lifted a ban on paying dividends in December, that was imposed last year and designed to give banks a larger cash cushion to weather the Covid crisis.

The lender also revealed that the outgoing chief executive, António Horta-Osório, was paid £3.4m in 2020 despite waiving a bonus worth as much as £1.8m in light of the pandemic. The banking boss – who is the longest-serving chief executive of a British bank – earned £4.7m in 2019.

The banking group also cancelled staff bonuses for 2020 after the pandemic put pressure on its finances. Bankers previously shared a pot worth £310m in 2019.

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Lloyds confirmed that Horta-Osório will formally step down on 30 April, days after the bank reports its first-quarter earnings. He was expected to leave by June this year, having recently been chosen as the next chairman of Credit Suisse.

He will be replaced by the HSBC banker Charlie Nunn.

Looking ahead, Horta-Osório warned that “significant uncertainties remain, specifically relating to the coronavirus pandemic and the speed and efficacy of the vaccination programme in the UK and around the world”.


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