Business

Lloyds shares soar on quarterly results

Lloyds Bank logo Image copyright PA

Shares in Lloyds Banking Group have risen by 7.5% in mid-afternoon trading in London, after it released its first-quarter results.

Underlying profit was at the top end of expectations, up 21% to £2.178bn.

Boss Antonio Horta-Osorio said there had been "continued improvement in financial strength". Lloyds shares were up 5.81p at 83.19p.

However, the group also said it had recorded a loss of £660m on the sale of TSB to Spain's Banco Sabadell.

As a result, Lloyds saw its statutory profit before tax fall by 11% to £1.214bn in the first quarter of 2015

The bank also said there had been no further provision during the quarter to cover the mis-selling of PPI products.

'Commitment'

Lloyds was forced by the European Commission to sell or spin-off TSB. This followed the UK government's purchase of a 43.4% stake in the group in 2009 - a move which the Commission said involved state aid.

Lloyds floated TSB on the stock market in 2014. A takeover of TSB by Sabadell was announced in March, but the deal has yet to be completed.

The sell-off of TSB is costing Lloyds because of the charges involved in removing TSB from its computer servers, with the cost estimated to be £450m.

In a statement accompanying its results, Lloyds said: "We agreed the sale of our remaining stake in TSB to Banco de Sabadell in the first quarter and as part of this agreement, we sold 9.99% of our stake in March.

"The full disposal of TSB will enable us to meet our commitment to the European Commission ahead of the mandated deadline."

'Increasingly healthy'

In its earnings report, the bank also said losses from bad debts fell 59% on the same period a year ago to £177m.

Lloyds also said it planned to pay a dividend for the half-year and full year for 2015, as previously indicated.

Richard Hunter, head of equities at Hargreaves Lansdown, said: "The Lloyds business is looking increasingly healthy, while the strength of the balance sheet and income growth augur well for the proper resumption of the dividend later in the year."

He added: "The fact that, for the moment, there is no further PPI provision will be a welcome change for generally beleaguered bank investors."

Over the past two years, the government has been selling off tranches of shares in the taxpayer-backed bank.

And in April, David Cameron said that up to £4bn worth of Lloyds Bank shares would be offered to small investors at below-market prices if the Conservatives win the election.

The offer would be part of the £9bn sale of shares in the bailed-out bank announced in the Budget in March.