Lloyds suffers profits collapse as it comes under fire for handing out just £500m under coronavirus Loans Scheme
Lloyds suffered a collapse in profits as it came under fire for its lacklustre lending under the Government’s coronavirus aid packages.
The bank, which is the UK’s biggest mortgage provider and one of the largest lenders to small businesses, has handed out just (CBILS).
This is a relatively small slice of the industry-wide total of £4.1billion. Lloyds’s CBILS loans account for just 3,752 of the 25,262 total.
Lloyds chief executive Antonio Horta-Osorio said the bank was expecting house prices to slump 5 per cent this year, before recovering next year
As it unveiled its first-quarter results yesterday, the bank revealed profits slumped 95 per centin the first three months of 2020 to just £74million.
The rout came as it set aside £1.4billion to prepare for loans issued before the crisis turning sour.
This means that Britain’s major banks – including Lloyds, Barclays, HSBC, Santander and Standard Chartered – have earmarked £6.8billion to cover already existing loans, which may be unpaid due to the pandemic.
Lloyds chief executive Antonio Horta-Osorio said the bank was expecting house prices to slump 5 per cent this year, before recovering next year, and added that around 17 per cent of its mortgage customers were asking for payment holidays.
Despite the increased provisions for losses on outstanding loans, banks are still under pressure to get money out of the door to help smaller firms survive the coronavirus crisis.
In order to encourage them to lend, the Government has agreed to bear 80pc of any losses which flow from CBILS lending.
But figures from industry body UK Finance showed that the CBILS programme has only resulted in £4.1billion of debt lifelines going to 25,262 firms.
Another 27,545 applications have either been denied or are in limbo.
The total amount lent is much lower than in Switzerland, which has handed out around 100,000 loans under a similar scheme, and Germany, which has lent £7.4billion to 13,000 firms.
But the governments there have agreed to guarantee 100 per cent of the value of the loan, rather than just 80 per cent, so banks are not on the hook.
Under the UK’s scheme, Lloyds is the laggard. RBS has approved 8,292 CBILS loans to a value of £1.6billion.
And even Barclays and HSBC, which both have a smaller piece of the market than Lloyds, are still ahead – with Barclays having lent £835million under CBILS to 4,361 businesses and HSBC approving £765million worth of loans to 5,295 companies.
Horta-Osorio claimed Lloyds’ CBILS lending figures were so low because most business customers wanted help such as overdraft extensions and payment holidays on their existing debt, rather than new loans.
He said: ‘We are very supportive of the Government’s schemes. We have to help our customers with whatever product they prefer, and what we have seen so far is that by a wide margin – ten to one – our small and medium-sized business customers prefer to ask for capital repayment holidays and working capital support through overdraft extensions than through term loans.’
But Ian Cass, managing director of the Forum of Private Business, said he is still receiving streams of complaints about the bank.
He said: ‘The only people getting money are those not really in desperate need.’
As UK Finance revealed the weekly CBILS update, the Treasury Committee of MPs renewed its calls for the data to be published daily. It is convinced this will push banks to boost lending but UK Finance has refused, saying it would place unnecessary strain on banks.
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‘Sticking two fingers up at us as soon as we need their help’
David Cleal owns Essex Bodies, a successful vehicle body-building firm he set up in 1985 that makes custom-made trailers for bin collection trucks among other things.
The firm turns over almost £2million a year, has around £1million orders on its books, and £1million of orders in the pipeline.
But with cash-flow drying up and 27 employees on his payroll, Cleal, 70, turned to Lloyds, his bank of more than 30 years, for help.
David Cleal (pictured with his grandson Bradley) has 27 employees on his payroll and his cash-flow drying up
But a month after completing the application process, he received a letter from Lloyds saying his request for a government-backed ‘coronavirus business interruption loan’ had been rejected.
Confusingly, the following day he received a call from the bank saying that, in fact, his application had been approved.
The trouble was they were only prepared to offer him £180,000 – £70,000 less than he was asking for.
The other catch was that Cleal had to put down his company’s assets, including premises and machinery, as collateral.
He turned down the offer and accepted a £250,000 loan from Hitachi instead, another of the accredited lenders.
Cleal said: ‘These banks wanted help from taxpayers when they were in trouble. Now they’re sticking two fingers up at us as soon as we need their help.’