Is Lloyds doing enough for UK?


BBC business editor Robert Peston asks if the bank is making enough funds available to small businesses

As 41% shareholders, it matters to taxpayers that Lloyds makes a profit.

So after £13bn of losses over the past two years, it will be hard not to breathe a sigh of relief that Lloyds made a pre-tax profit of £1.6bn in the first six months of this year.

Why the big recovery? Well losses on loans and investments going bad have halved to £6.6bn and the ongoing running costs of the business have been reduced by £1.1bn, largely through job losses.

But it also matters whether big banks like Lloyds are doing enough to support the tentative recovery of the British economy.

There the evidence is more mixed. Lloyds says that it has provided £4.1bn of credit to small businesses, and says that it is ahead of targets agreed with the government.

But its total net loans to all households and businesses have dropped 1% to £368bn and it is charging more for that credit relative to what it pays for funds (the next interest margin has widened 24% to 2.44%).

By the way, this is only my first take on Lloyds' figures, and I will be filing more when I have time between interviewing Lloyds chief executive, Eric Daniels, and doing assorted live broadcasts.

Update 0848: In his interview with me, Eric Daniels insisted Lloyds is making ample funds available to small businesses.

But - and this is what other bank chief executives also say - many borrowers are choosing to repay their debts.

Which is why Lloyds net lending figures are flat.

Now there is a contradiction between what Mr Daniels and his peers say and the complaints of many small businesses that they can't get credit at the right price.

As I've pointed out before, the only way to reconcile this contradiction is on the basis that banks' assessment of whether a small business is credit worthy is harsher than the wannabe borrower's view of its own prospects.

PS I pointed out to Mr Daniels that the fall in the bad debt charge was greater than the swing from loss to profit. He nonetheless maintained that there has been an across-the-board improvement in the bank's basic operational performance.

You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.

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