Shares in Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US) slid by around 2.5% this morning, as PPI mis-selling charges offset positive sentimentality arising from a stronger case to resume paying dividends to shareholders.
Statutory pre-tax profit fell to £863m in the first half, compared to£2.13bn in the same period last year, thanks to a £1.1bn charge for legacy issues surrounding the mis-selling of Payment Protection Insurance, as well as further fees to settle the LIBOR rate rigging settlement.
These negatives weighed on what was otherwise a relatively positive update, which saw underlying profit increase by 32% to £3.82bn in the six-month period. Chief executive Antonio Horta-Osorio commented:
“In the first half of 2014, we continued to successfully execute our strategy, further enhancing our leading cost position and low cost of equity, by investing in the products and services our customers need and further strengthening and de-risking our balance sheet, reducing costs and increasing efficiency. As a result, we substantially improved our underlying financial performance and delivered a statutory profit, despite further charges for legacy issues.”
Lloyds used the update to state that it would be applying to the Prudential Regulatory Authority (PRA) in the second half to restart dividend payments, following a strengthening and reshaping of the company that included the TSB spin-off (Lloyds sold 38.5% of its ownership in the IPO) and sale of its remaining stake in St James Place. The bank has also reduced its international presence to eight countries, allowing it more focus on its remaining operations.
Investors have short memories. If the banks deliver profits and dividends and there are no more blow-ups for a few years, then they'll be trusted again.
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Sam Robson has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.