Lloyds Banking Group Posts Net Loss Of $2.2 Billion

Lloyds Banking Group Posts Net Loss Of $2.2 Billion

The Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) posted a net loss of £1.4 billion or $2.2 billion on Friday, one of the reasons being that it was forced to save billions of dollars to compensate customers to whom financial products were sold inappropriately.

The British Government owns a 39 percent stake in Lloyds. The bank, after getting a bailout during the financial crisis, stated that it will make another provision of £1.9 billion during the fourth quarter related to various misconducts. There was a decrease in the net loss of the bank last year to Euro 1.4 billion, compared with Euro 2.8 billion in 2011.

As per the reports, the British government may initiate selling its stake in the British Bank. Lloyd, on the other hand, held that it was in the process of disposing its non-core assets, as well as refocusing on the bank’s prime retail division.

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 ‘‘My main objective is to get taxpayers’ money back’’ Lloyds’ chief executive, António Horta-Osório told reporters during a conference call early on Friday.

Mr. Horta-Osorio is in the queue for a £1.5 million bonus for 2012 that will be paid in deferred shares, which he will not be able to access until 2018. The British Government, in order to receive the bonus, must have sold at least one-third of its holdings in the bank above 61 pence a share, which is similar to what was paid by local taxpayers to bail out the bank in 2008.

There was a decline in the earnings of the company due to various extra charges, which includes an additional £1.5 billion, or $2.3 billion, charge in the three months through December 31. This charge was for unsuitably selling insurance to the customers. Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY), with the creation of this additional amount, has now kept aside a total of £6.8 billion to compensate the consumers.

Also, the bank has tripled the amount during the fourth quarter of the year that it will utilize to compensate small businesses who were inappropriately selling interest rate hedging products. The figure now stands at £400 million, up from £90 million.

‘‘It is currently not possible to predict the scope and ultimate outcome of the various regulatory investigations’’ Lloyds said in a statement.

Regarding the investigation over the global benchmark interest rates, the British Bank said it is continuously cooperating with the Local and International regulators. Others banks from Britain like Barclays PLC (NYSE:BCS) (LON:BARC) and the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS) have paid fines in millions of dollars in connection with the rate rigging scandal.

Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) shares are trading around 54 pence and have risen 56 percent over the last 12 twelve months.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@wordpress-785388-2679526.cloudwaysapps.com
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