Lloyds profits boost banks recovery

Lloyds Banking Group profits boosted the banking sector
12 April 2012

Further signs of a revival in fortunes for UK banks have emerged after Lloyds Banking Group racked up bigger-than-expected profits of £1.6 billion.

The half-year surplus smashed City hopes and marked a "significant milestone" for the taxpayer-backed bank following last year's £4 billion loss.

Lloyds said its figures were helped by a more than halving of bad debts, which had brought the group to its knees during the financial crisis.

The figures add to a strong interim results season so far for the industry and reinforce prospects for a profitable exit from the Government-owned bank assets.

Nationalised Northern Rock on Tuesday said the "bad bank" was back in profit and part-nationalised player Royal Bank of Scotland is also expected to announce profits when it reports on Friday. But the sector's apparent return to health has increased the pressure on firms to lend more to cast-strapped businesses.

Lloyds, which is 41% owned by the taxpayer after a rescue bail-out two years ago, claims it is ahead of its Government-set targets as gross lending to businesses reached £24 billion in the first half.

However, only £5.7 billion of this was to small businesses and the bank admitted firms are still paying back more than they are borrowing. Net lending to households and businesses - which takes into account repayments - dropped 2% to £368 billion and remained flat within the core businesses.

Chief executive Eric Daniels said despite borrowing rates being cheaper now than before the financial crisis, there was little appetite to borrow.

"Credit is available, but the demand simply isn't there," he said.

Prime Minister David Cameron met with Bank of England Governor Mervyn King on Wednesday when lending levels were likely to have been top of the agenda.

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