COVID-19: UK bank Lloyds sinks into first-half loss on pandemic woes
The deadly pandemic is having a "profound" effect on global economy, says lender
London: British bank Lloyds on Thursday logged a first-half net loss after booking a vast 3.8 billion pound ($4.9-billion) charge as coronavirus sparked a "significant deterioration" in the outlook.
The lender suffered a loss after taxation of pounds 234 million in the first-half of 2020 compared with a year-earlier profit of 1.94 billion pounds, adding that the deadly COVID-19 outbreak is having a "profound" effect on the global economy.
According to Bloomberg, Britain's biggest mortgage lender now expects to set aside between 4.5 pounds and 5.5 billion pounds this year to cover the economic fallout from months of lockdown and the end of government support programmes.
"The outlook has clearly become more challenging since our first-quarter results, with the economic impact of lockdown much larger than expected at that time," said CEO Antonio Horta-Osorio.
Prepare for worse to come
Lloyds is the latest UK bank preparing for a more severe recession, even as customers continued to repay their debts as expected in the past three months. The lender's severe scenario includes a spike in unemployment to 12.5 per cent and a contraction of 17.2 per cent this year.
About 50,000 of the bank's 65,000 staff are working from home to slow the spread of the coronavirus. Horta-Osorio said the bank would like to bring workers back "where possible", although people are staying home until at least September and could work flexibly in future, meaning the bank becomes less reliant on office space.
More provisions
Lloyds posted a statutory pre-tax loss of 676 million pounds for the second quarter, more than analyst forecasts. Its provision, which was 1 billion pounds above analyst forecasts, comes a day after rival Barclays announced a higher than predicted charge to cover bad loans.
European banks including Lloyds suspended dividends to conserve capital during the pandemic, following pressure from regulators. Lloyds also paused its 1.75 billion pound share buyback programme last September after booking additional provisions for mis-sold insurance.
The board will discuss restarting dividends at the end of the year.
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