Lloyds profits up despite sale of TSB costing 660 million

TSB’s takeover was announced in March.

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By :  ,  Financial Analyst

Lloyds Banking Group has seen underlying profits up 21 per cent to £2.17 billion in the first quarter of 2015. This is despite the company recording a loss of £660 million on the sale of TSB to Spanish bank Banco de Sabadell.

The cost of the sale also meant that statutory profit before tax fell by 11 per cent to £1.214 billion in the same period. However, shares in the bank are still up by 3.4 per cent at 80p.

TSB's divestment from Lloyds banking group came after a European Commission ruling that the UK government's purchase of a 43.4 per cent stake in the group in 2009 counted as state aid. The result was a ruling that a portion of the business had to be sold or spun-off.

Lloyds therefore floated TSP on the stock market last year. In March, the takeover by Sabadell was announced, however the deal is not yet complete.

The main reason that the sale is costing Lloyds is technological – the bank says that the cost of removing TSB from its computer servers will be around £450 million.

A statement from the banking group explained: "We agreed the sale of our remaining stake in TSB to Banco de Sabadell in the first quarter and as part of this agreement, we sold 9.99 per cent of our stake in March."

It added that the "full disposal" of TSB means the company will meet its commitment to the European Commission ahead of the deadline.

The latest latest earnings report from Lloyds indicates that the business is looking increasingly healthy. Losses from bad debts fell 59 per cent compared to the same period a year ago, to £177 million and group chief executive Antonio Horta-Osorio says that there has been continued improvement in financial strength.

Richard Hunter, head of equities at Hargreaves Landsdown Stockbrokers told the BBC that the Lloyds business is looking increasingly healthy. "The strength of the balance sheet and income growth augur well for the proper resumption of the dividend later in the year," he added.

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