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Lloyds profit up on UK growth
By Steve Slater and Clara Ferreira-Marques
LONDON (Reuters) - British bank Lloyds TSB reported a 6 percent rise in underlying 2007 profit and raised its dividend on Friday, absorbing a rise in its writedown on risky assets and sending its shares over 5 percent higher.
Analysts said the results showed good underlying growth and a 280 million pound writedown -- over a third higher than its last estimate -- was modest compared to rivals who have risked more on complex financial products that have turned sour after the U.S. subprime housing crisis.
"They are producing growth without taking big bets on anything, and that's quite a good thing to have in the current market," said Mike Trippitt, analyst at Oriel Securities.
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Britain's biggest provider of current accounts said its annual profit before tax and volatility rose to 3.92 billion pounds ($7.7 billion), up from 3.71 billion in 2006.
Revenue growth of 5 percent outpaced cost growth of 1 percent, and Lloyds' core UK retail bank profit jumped 17 percent to 1.81 billion pounds, as it opened over 1 million new current accounts.
By 1005 GMT Lloyds shares were up 4.8 percent at 457.75 pence after hitting 465p, making it the leading UK blue-chip stock and lifting it above HBOS to become Britain's fourth biggest bank by market value.
Analysts said the results were slightly ahead of expectations, writedowns compared favorably to other major financial firms and the outlook statement was positive.
"What was once simply a low growth bank is now showing the benefits of conservatism in its business model and balance sheet," said Alex Potter, analyst at Collins Stewart.
Lloyds raised its final dividend by 5 percent to take its full-year payout to 35.9 pence, also up 5 percent on the year, and said it expects to increase the dividend over time.
"We think we can both increase the cover and increase the dividend," said Eric Daniels, Lloyds chief executive, but he declined to provide further guidance.
Lloyds' interim dividend increase was its first rise for five years, but turmoil in financial markets since then reignited concern whether it could be sustained. Daniels said the bank had no hesitation in raising the payout.
"Our earnings are strong and our prospects are very good. I think our board had one of its easier decisions this time around," he told reporters on a conference call.
WHOLESALE SLOWS
Lloyds' wholesale and international banking profit fell 12 percent to 1.44 billion pounds. Without the writedown the unit's growth was 5 percent, slowing from growth of 12 percent in the first half in the face of market turmoil, which appears set to continue.
"We think the markets are going to be somewhat fragile and aren't going to be easy. That uncertainty is going to last for a good long while. We would expect it will be at least a few quarters rather than weeks or months," Daniels said.
He predicted the UK economy will slow this year, but would not go into recession.
Daniels said uncertain markets could increase acquisition opportunities, but added: "We're of course alert to opportunities as they come up but we don't have to do something, we've got good growth and we've positioned ourselves nicely."
Lloyds had previously flagged a 201 million pound writedown from the impact of a drop in the value of assets following the U.S. subprime housing crisis, but raised that by almost 80 million.
The higher charge is mainly due to a cut in the value of the trading portfolio in its corporate markets unit, with the turmoil hitting profits by 144 million pounds, more than the 90 million estimated in December.
Lloyds wrote down the value of its asset-backed securities collateralized debt obligations (CDOs) by 114 million pounds, compared to 89 million previously flagged, and cut the value of structured investment vehicle (SIV) capital notes by 22 million, unchanged from its last guidance.
Its impairment loss rose by 15 percent on the year to 1.8 billion pounds, but UK retail banking bad debts fell by 1 percent to 1.22 billion. Lloyds said it expected the retail impairment charge in the first half of this year to be similar to the first half of 2007.
(Editing by David Cowell)
