Lloyds to slash office space as it resumes dividend despite 72 per cent profit drop
Lloyds today resumed its dividend despite a sharp fall in profit for the year as the bank unveiled plans to expand its insurance and wealth divisions and slash office space.
The lender posted pre-tax profit of £1.2bn in 2020, down 72 per cent from £4.4bn the previous year as the pandemic shrank income and led to higher loan impairment charges.
Lloyds set aside £4.2bn to cover so-called bad Covid loans.
However, the figures were ahead of analyst forecasts and Lloyds said it would resume a dividend of 0.57p per share following a halt on payouts ordered by the Bank of England.
Shares in Lloyds ticked up almost 1.5 per cent after markets opened, before settling at an increase of 0.5 per cent by mid-morning.
It came as outgoing chief executive Antonio Horta-Osorio set out a raft of new targets to refocus the lender’s business and cut costs.
The bank said it will seek to increase funds from customers in insurance and wealth by £25bn by 2023 and cut office space by 20 per cent within three years.
It is the latest sign that major banks will look to reduce their office space amid a shift to home working during the pandemic after HSBC said it will slash its footprint by 40 per cent in the long term.
Lloyds also confirmed Charlie Nunn, former head of wealth and personal banking at HSBC, will take over as chief executive on 16 August.
The bank previously announced that Horta-Osorio would step down at the end of April after 10 years in the role, with chief financial officer William Chalmers taking over during the interim.
“Looking forward, 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,” said Horta-Osorio.
“I remain confident that the group’s clear purpose, unique business model, significant competitive advantages and the customer focused evolution of our strategy we have announced will ensure that the group is able to help Britain recover and in so doing, help transition to a sustainable economy.”
Horta-Osorio’s pay package fell to £3.4m from £4.7m the previous year after top executives waived their bonuses during the pandemic.
Lloyds forecast a further reduction in costs of £7.5bn this year, with an improvement in return on tangible equity of between five and seven per cent.
Chris Beauchamp, chief market analyst at IG said the bank “continues to struggle to find a meaningful catalyst for the time being”.
“For a share price that has rallied 60 per cent since the September low, Lloyds’ results don’t offer much comfort in the near-term.”
CMC Markets chief market analyst Micheal Hewson said the results were “a fitting final legacy” for the outgoing boss.
“All in all today’s numbers from Lloyds appear to mark a nice postscript for outgoing CEO Antonio Horta Osorio, with the dividend resumed, and barring any mishaps a bank that looks well set to take advantage of a summer recovery in the UK economy.”