Lloyds says Covid-19 could cost it £1.4 billion, triggering profits crash

Lloyds today set aside a thumping £1.43 billion to cover damage to its business from the impact of coronavirus on the UK economy and customers’ ability to repay the debts.

Underlying profit at the business in the first quarter plunged 74% as a result, coming in at just £558 million against £2.17 billion in the same quarter a year earlier.

The key profitability measure of return on tangible equity fell from 12.5% to 5% but its capital buffers actually increased, up from 13.9% to 14.2% measured by the industry standard core equity tier one ratio.

Along with other UK banks, Lloyds was ordered not to pay its dividend for 2019, bolstering its cushion to get through the crisis.

Chief executive Antonio Horta-Osorio, who has come under fire for the bank’s relative sluggishness in getting the government’s coronavirus business interruption loans out to customers, said Lloyds had approved 880,000 payment holiday on mortgages, loans, cards and motor finance.

He also stressed that Lloyds had its own £2 billion Covid-19 fund offering new overdrafts or extensions.

Lloyds has said it was slow to lend on CBILS because of the platform banks had to use to provide them.

Horta-Osorio said: “Given the our clear UK focus we will inevitably be impacted by the nationwide lockdown relating to the coronavirus and given the significant change in the operating environment and economic expectations including much lower rates, lower levels of activity and higher impairments, the group’s previous guidance is no longer appropriate.

“Significant uncertainty remains and we will update the market once there is greater clarity.”