The share price of Lloyds (LSE: LLOY) (NYSE: LYG.US) dropped 2p to 82p during early trade this morning, despite the bank reporting it had more than doubled its underlying profit to £6.2bn, reflecting improved profitability in the core business and a significant reduction in non-core losses. The stock has risen 51% over the last 12 months.
The bank, which is still 33% owned by the taxpayer, revealed a profit of £415m on a statutory basis, compared with a loss of £606m the year before.
The PPI scandal continues to be a burden, with Lloyds increasing its provisions by £1.8bn, based on updated predictions of the number of successful complaints.
The 250 year old bank expects to apply to the regulator in the second half of the year to restart dividend payments “at a modest level and to deliver progressive and sustainable payments to shareholders thereafter”. For the medium term the dividend payout ratio is expected to be 50% of sustainable earnings.
The chief executive, António Horta-Osório, said:
“Over the last three years we have reshaped, strengthened and simplified our business to create a low-risk efficient retail and commercial bank that is focused on our customers and on helping Britain prosper. These results, with Group underlying profit more than doubled to £6.2 billion, confirm that the Group is returning to robust health, thanks to the commitment of our people and the consistent execution of the strategy we set out in June 2011.
“We have a strong business model and have made significant progress, despite our legacy issues, in improving our capital position and profitability in a sustainable way. As a result, the UK Government started the process of returning the Group to full private ownership.”
Analysts are predicting a dividend of 2p per share in 2014, which would offer a possible income of 2.4%.
The decision to ‘buy’ — based on today’s results and the future prospects for the banking sector — is, of course, entirely your decision.