Lloyds Banking Group reported a strong gain in profits as underlying income improved despite another big charge for payment protection insurance (PPI) compensation.
The bank’s share price rose by more than two per cent at the time of writing.
Profit before tax rose by 23 per cent to hit £3.1bn in the first half of 2017, beating analysts’ consensus expectations. The bank’s measure of underlying profit increased seven per cent to £4.2bn.
The rise in profits was driven by higher income and lower total costs of £4.3bn for the six months to June, down from £4.6bn in 2017. Operating costs at £4bn were flat compared to the first half of 2017 even as investment increased, in part because of branch closures.
Net interest income rose by seven per cent in the half year.
The bank was forced to take a £460m charge in the second quarter for missold PPI, as claims volumes boomed. Advertising campaigns before the PPI deadline comes in August 2019 have pushed complaints to 13,000 per week, compared to the 11,000 Lloyds had previously assumed.
Return on tangible equity, a measure of shareholder returns, hit 12.1 per cent. The group’s core equity tier one capital ratio, a measure of balance sheet strength, rose by more than 1.2 percentage points during the first half, to 15.1 per cent.
The interim dividend was increased to 1.07p per share.