Lloyds TSB profit falls

July 27, 2001 Posted: 0708 GMT

LONDON (CNN) -- Lloyds TSB, the UK's third-largest bank, posted a 12.3 percent fall in first-half net income amid cut-throat competition in financial services.

The bank's first-half net income to June 30 fell to £1.29 billion ($1.84 billion), or 23.2 pence a share, from £1.46 billion, or 26.5 pence a share in the same period a year ago. Revenue grew 12 percent to £4.7 billion

Lloyds, whose £20 billion hostile takeover of mortgage lender Abbey National was blocked on July 10 by the UK government's competition authorities, increased bad debt provisions by 22 percent to £323 million.

UK banks, along with their peers in continental Europe, are in the middle of a round of consolidation as banks seek growth as competition intensifies in the retail banking, insurance, and mortgage markets.

Lloyds said operating profit increased 9 percent to £2.23 billion from £2.04 billion in the same six months of 2000. But profit before taxes fell 11 percent to £1.83 billion from 2.064 billion.

Lloyds first made an unsolicited bid for rival Abbey, the UK's second-largest mortgage lender, in January and the antitrust review finally killed off the bid, which analysts said would force Lloyds to look to Europe for a takeover target.

"The government has told Lloyds TSB it cannot increase market share in the UK through consolidation," Henk Potts of Barclays Stockbrokers told CNN. "It now needs to look to Europe. Names in the frame are Fortis (of the Netherlands) and Banco Bilbao Vizcaya (Spain)."

Chief Executive Maarten van den Bergh hinted in the earnings statement that the search for a partner was still on the cards: "Whilst the acquisition of Abbey National would have completed our Group, it was never going to be a transformational deal, nor has it sidetracked us from growing and building our business."

Lloyds is still the UK's largest retail bank with about 2,400 branches and is a leading mortgage lender through its Cheltenham & Gloucester unit and has a growing life and general insurance business that includes Scottish Widows, which was bought last year.

Lloyds said its sales of life assurance, pensions and unit trusts grew 20 percent to £395.8 million in the first half, as the bank began to benefit from the acquisition of Scottish Widows.

The company also said it now has 1.6 million Internet banking customers at its LloydsTSB.com Web site.

Lloyds, once the top rated UK bank, has seen its shares (LLOY) slide from a peak of around £11 pounds in 1998 to 662 pence at the close in London on Thursday. In early London trade the stock rose 2 percent to 675.5 pence.

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