UK's Lloyds bank targets wealth push and office cuts, as profits fall

© Reuters. FILE PHOTO: A sign hangs outside a Lloyds Bank branch in London

By Iain Withers and Lawrence White

LONDON (Reuters) – Lloyds Banking Group (LON:)’s outgoing Chief Executive António Horta-Osório set out fresh targets to expand the lender’s insurance and wealth business and further cut costs, as the bank resumed a dividend despite a sharp fall in profits for 2020.

Britain’s biggest domestic lender reported pretax profits of 1.2 billion pounds ($1.7 billion), well down on 4.4 billion pounds the previous year, after pandemic lockdowns shrank household spending and drove up provisions for bad loans.

But it still beat the average of analyst forecasts of 905 million pounds.

Horta-Osório, who is leaving Lloyds after a decade running the bank to stand for election as chairman of Credit Suisse (SIX:) in April, said the bank would increase funds from insurance and wealth customers by 25 billion pounds by 2023.

Lloyds will also cut office space by 20% within three years, the second British lender to unveil such plans this week after HSBC announced a 40% cut to its footprint as banks look to capitalise on remote working habits brought on by the pandemic.

Lloyds said its overall costs would be trimmed below 7.5 billion pounds by the end of this year.

HSBC executive Charlie Nunn is set to replace Horta-Osório, and will start in August, the bank said.

Similar to rivals HSBC, NatWest and Barclays (LON:), Lloyds’ profits were dented by a dip in customer spending and wafer thin central bank interest rates.

Lloyds set aside 4.2 billion pounds to cover loans expected to sour, which was less than the 4.5 billion to 5.5 billion pound range previously given.

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The bank said it would pay a 0.57 pence dividend per share, the maximum allowed by the Bank of England and above a forecast of 0.53 pence.

Like other banks, Lloyds was forced by the Bank of England to suspend payouts last year to shore up its finances in the pandemic.

The bank’s core capital ratio, a key measure of financial resilience, increased to 16.2% compared to 15.2% in September.

Horta-Osório’s pay package for 2020 fell to 3.4 million pound, after he and other executives waived bonuses for the year due to the pandemic. He was paid 4.7 million pounds the previous year.

($1 = 0.7048 pounds)

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