Lloyds profits more than double but RBS sell-off still ‘years away’

Lloyds Banking Group has today posted pre-tax profits for 2016, double that of the previous year.

The still partly state-owned bank, which owns Bank of Scotland, said it had made £4.2 billion last year, more than double the £1.6bn figure reported for 2015.

However, the news comes as analysts said fellow bailed-out bank Royal Bank of Scotland is still years away from being returned to the private sector.

Lloyds, which is now less than 5 per cent owned by the taxpayer following the sell-off of much of the government’s £25 billion stake, said profits had been boosted by falling costs relating to compensation for customers who were mis-sold payment protection insurance, which it said had “reduced significantly”.

The Edinburgh-based banking group, which also owns the Halifax bank brand, said shareholders were in line for a final dividend of 1.7p a share, giving a total payout for 2016 of 2.55p – an increase of 13 per cent on the previous year. It also announced a special dividend of 0.5p.

Chief executive Antonio Horta-Osorio said: “We continue to improve our customers’ experience, simplifying the business whilst growing in targeted areas and in December announced the acquisition of MBNA’s prime UK credit card business.

“Strong capital generation, which is a consequence of our business model, has enabled us to fully cover the expected capital impact of the MBNA acquisition, increase our ordinary dividend by 13 per cent and pay a special dividend.”

This is all a far cry from the continuing malaise at RBS, according to experts, despite news last week that the still 73 per cent state-owned bank may be spared further costs relating to obligations to sell-off the tranche of branches, bundled up as Williams & Glyn, to satisfy EU state aid rules.

Although not finalised, it is widely expected that EU bosses will agree to RBS’s plan to sink £750 million into measures designed to promote competition in the UK banking sector rather than force the creation of a new bank out of RBS’s own network.

Providing a tempering voice, Michael Hewson, chief market analyst at CMC Markets, said: “Now that Williams & Glyn has been put to one side, that’s good. We don’t have to worry about that. But that is not to say we don’t have to worry about a whole host of other factors.”

Citing the expected multibillion dollar fine from the US Department of Justice over the mis-selling of mortgage-backed securities, legal action from shareholders over the bank’s rights issue of 2008, and the possibility of further investigations into the activities of the bank’s Global Restructuring Group in the wake of the financial crisis, Mr Hewson responded to the question of whether RBS will remain in public hands for some years to come by saying: “I would say so.”

Conveying a more optimistic tone as RBS prepares to announce its latest loss making results on Friday, Graham Campbell, chief executive of Edinburgh-based Saracen Fund Managers, said: “It has been a long, long slog. The untangling of Williams & Glyn has been such a huge diversion for management, and it’s an incredibly difficult task. The recovery of RBS has been going for eight years now. This is hopefully the final leg of it.”

Meanwhile back at Lloyds, a remuneration report released along with the group’s results showed that CEO Horta-Osorio’s total pay package shrank in value to £5.5 million last year, down from £8.7m in 2015.

The reduction was due to a cut in his long-term shares award following the Brexit vote, which hit the company’s stock.