Lloyds latest bank to report big'¨profits fall after bond buyback

Lloyds, which owns Halifax Bank, insisted it delivered a robust performance. Profits fell 6 per cent to £2.1bn on an underlying basis and excluding the TSB business sold last year, profits were stable on a year earlier.

​Lloyds’ c​hief ​e​xecutive Antonio Horta-Os​o​rio is eliminating thousands of jobs to streamline the business and support a progressive dividend policy, in the final phase of a recovery plan following a ​£​20.5​bn taxpayer-funded bailout during the 200​8 financial crisis.

Lloyds’ performance ​beat Standard Chartered and Barclays, where quarterly revenue fell in their large investment banking operations because of a weak global market environment. Lloyds is relatively insulated because of its greater reliance on retail customers.

​​Analyst Gary Greenwood at Shore Capital​ said: “Overall, these represent a solid if unexciting set of results, which is not necessarily a bad thing for a bank.”

Lloyds said Halifax played an important role in boosting profits over the period.

Russell Galley, managing director of Halifax Bank, said: “Halifax continues to be one of the most switched-to banks on the high street with almost half a million customers having switched to us since the introduction of the Current Account Switch Service.

“We have just refreshed our advertising campaign, and our market​ ​leading Help to Buy Isa and new mortgage cashback offer​ ​demonstrate our commitment to giving customers extra.”

Lloyds took a £790​m charge from its controversial decision to buy back £3​bn of high-interest bonds - also called “enhanced capital notes” or ECNs.

It won a lengthy legal battle against investors unwilling to sell the bonds, which offered high levels of income, and the bank will receive a £900​m cash boost from the move over the next four-and-a-half years.

Figures from Lloyds come after a difficult first quarter for banks, with investment banking rivals hit particularly hard amid recent stock market turmoil.

Barclays posted a 25​ per cent​ fall in first-quarter profits on Wednesday after its corporate and investment banking arm saw underlying profits fall 31​ per cent​.

Royal Bank of Scotland will reveal how it has fared on Friday.

Retail players have been shielded from the worst of the banking woes, thanks in part to a buy-to-let lending rush ahead of this month’s stamp duty increase.

Lloyds said the first quarter had been “incredibly strong” for mortgages after seeing a surge in demand from buy-to-let borrowers and those buying second homes.

It saw buy-to-let lending rise 3​ per cent​ in the first quarter of the year, helping drive an overall 1​ per cent​ rise in mortgages.

Mr Horta-Osorio added to a flurry of warnings this week over a drop-off in lending following the April 1 stamp duty hike.

But the group said lending was set to level out over the year.

Santander warned on Wednesday that the mortgage industry faced “challenges” over the year ahead following the drop-off in demand since April 1 and ahead of the EU referendum.

Estate agencies Countrywide and Foxtons also said they expected a marked slowdown in activity.

Lloyds said it took no further charges for the payment protection insurance (PPI) mis-selling scandal, with claims in line with expectations at 8,500 a week.