Reuters: Hot Stocks: UPDATE 2-Lloyds profit jump pushes shares towards state break-even

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UPDATE 2-Lloyds profit jump pushes shares towards state break-even Apr 30th 2013, 09:03 Tue Apr 30, 2013 5:03am EDT * Expects 2 bln stg cost reduction in 2014 from 2010 * Q1 underlying profit 1.48 bln stg vs 497 mln * Says Verde IPO likely next year * Shares in Lloyds hit near two-year high (Adds CEO comments from conference call) By Matt Scuffham LONDON, April 30 (Reuters) - State-backed Lloyds Banking Group reported a jump in first-quarter profit and upped its cost savings target, helping its shares close in on the government's break-even price as they hit a near two-year high. Lloyds, 39-percent owned by the British taxpayer, said its underlying profit trebled to 1.48 billion pounds ($2.3 billion), benefiting from improved margins, lower costs, and falling losses on bad loans. Shares in the bank topped the FTSE 100 risers, gaining as much as 6.9 percent and hitting a high of 57.2 pence. The government considers a sale at 61 pence would enable it to break even after it pumped 20.5 billion pounds into the bank to keep it afloat during the 2008 financial crisis. Chief Executive Antonio Horta-Osorio said Lloyds had made substantial progress during the quarter. However, he said he was focused on improving the bank's performance and had not held talks with the government or UK Financial Investments (UKFI), which manages Britain's stake, over a share sale. "It's management's job to operationally prepare the bank as well as possible in order for shareholders to decide about privatization. It is ultimately up to UKFI and the Treasury to decide on that and we have not been holding discussions with them in that regard," he told reporters. Industry and political sources have told Reuters the government is keen to start selling off shares in the bank ahead of the 2015 general election. A sale of shares in Lloyds is seen as more realistic for the government than selling down its 81 percent shareholding in Royal Bank of Scotland. An important step towards an eventual share sale could be a resumption of dividend payments. However, finance director George Culmer said Lloyds still had "hurdles" to overcome before that would be possible. Lloyds' capital strength has come under scrutiny after the Bank of England's Financial Policy Committee said last month that UK banks needed about 25 billion pounds of extra capital. Analysts had said that meant Lloyds might need to raise cash. Lloyds said it was waiting for Britain's financial market regulator to decide what action might be required of banks after the FPC's estimates, but was confident in its capital position. Its core capital was 12.5 percent at the end of March and should be 9 percent at the end of this year, based on the full impact of new Basel III capital rules. That should rise above 10 percent by the end of 2014, it said. Lloyds said it was pushing on with plans to float 630 branches making up the Verde business that European authorities have ordered it to sell as a price of the state bailout. A planned sale of the network to the Co-operative collapsed last week and the bank is now pursuing an initial public offering (IPO), which will probably take place in 2014, Culmer said. Culmer said the cost of selling the branches would increase by between 200 million and 300 million pounds as a result of switching to an IPO. The total cost will rise to as much as 1.6 billion, he said. The bank said costs in the first quarter fell 6 percent from a year ago and it expected to cut costs to about 9.15 billion pounds in 2014, a reduction of 2 billion pounds ($3.1 billion)from 2010 and double the target in its restructuring plan. ($1 = 0.6454 British pounds) (Additional reporting by Steve Slater; Editing by Tom Pfeiffer and Helen Massy-Beresford) Link this Share this Digg this Email Reprints

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