Lloyds shares slip with investors unconvinced by its PPI claim

Added 26th October 2016

Shares in Lloyds Banking Group slipped on Wednesday morning as the bank updated the market on its third quarter performance and its progress in dealing with the long-running payment protection insurance scandal.

Lloyds shares slip with investors unconvinced by its PPI claim

The bank’s shares dropped by 2.8% to 53.5p as it revealed profit before tax slid by 15% in its third quarter versus the same quarter in 2015 to hit £811m. Earnings per share slipped to 0.2p from 0.8p in the third quarter last year.

The shares recovered some ground later in the morning to sit 1.1% lower at 54.7p.

The bank also attempted to draw a line under the PPI miss-selling scandal that has cost it billions of pounds. It said it has now set aside a ‘final’ £1bn to cover further claims made against it.

Lloyds is likely to be paying out a large proportion of this money, if not more, as claims are going to continue until at least 2019, when a deadline is expected to pass.

The FTSE 100 as a whole was down just under 1% to 6950 this morning, while the 250 also shed around 1% of its value to sit at 17,612.

Asset managers among the major Lloyds Banking Group shareholders include Schroders, BlackRock, LGIM and Vanguard. The bulk of this is in passive funds.

“This morning Lloyds became one of the first banks to report Q3 results which fell a little short of expectations,” said Helal Miah, investment research analyst at The Share Centre. "Investors should note that charges and one off items were higher than the market was anticipating which left the headline profit declines at the bank down 15%. When you strip these items out, profits fell 3% to £1.91bn for the three-month period. When you compare this to the same nine-month period last year profits were down 4%.”

“However, there are some positives to take away from this release,” Miah noted. “The net interest margin rose a little during the period, while Lloyds maintained full year net margin guidance of 2.7% despite the low level of interest rates. Furthermore, lending to small businesses is still active despite fears that Brexit could impact business confidence. We continue to recommend Lloyd’s as a ‘hold’ as it continues with its plan to simplify the business and cut costs. Our growing confidence in the group, but not the sector, has been hit and the uncertainty that has been created looks likely to hang over the group for some time.”

Meanwhile fund supermarket Hargreaves Lansdown has set up a petition asking the government to reconsider its decision to cancel the public sale of Lloyds shares. The company hope to cross the threshold of 10,000 signature which obliges the government to respond and even the 100,000 point which triggers a debate in Parliament.

“We're disappointed the government plan to exclude the general public when selling its stake in Lloyds Banking Group,” said CEO Ian Gorham. “Rather than engage with working taxpayers willing to invest in our economy, the government has favoured city institutions." 

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Alex Sebastian

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Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.

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