Lloyds, the owner of Bank of Scotland, faced pre-tax losses worth 602 million pounds in H1 of 2020 as it allotted another 2.4 billion pounds in preparation for would-be bad loans, in the face of the “much larger than anticipated” COVID-19 economic recession.
Britain’s number one retail bank now has a total of 3.8 billion pounds to cover the oncoming phase of loan defaults in the near future, caused by its business and personal borrowers.
For the whole of 2020, Lloyds estimates that reserves for coronavirus losses will stand anywhere between 4.5 billion pounds and 5.5 billion pounds.
Lloyd’s CEO Antonio Horta-Osorio, who’s preparing to leave office in 2021, said helping clients amid a pandemic is an “investment” as the institution’s functions are centered mainly in the UK.
The bank announced it had issued 1.1 million loan repayment holidays to its retail clients in segments like auto finance, home mortgages, loans, and credit cards. Throughout the pandemic, it has also underwritten business loans worth over 9 billion pounds via Government relief schemes.
“We know, naturally, that the help Lloyds offers to its clients amid the ongoing global health crisis will come at a cost to the bank,” said Mr. Horta-Osorio. “We trust this approach is right, as helping our clients directly helps rebuild the economy, which will ultimately benefit the group.”
Lloyds reported a pre-tax loss of 602 million pounds in the first half of 2020, a poor performance compared to last year’s H1 when it raked in profits of 2.9 billion pounds. Income for H1 dipped by 16 percent to 7.4 billion pounds.
The massive reserve for possible loan losses exceeded analyst expectations by 60 percent. The thorough re-evaluations fueled it into the bank’s anticipated scenarios on the future of the ongoing economic recession.
Lloyd’s shared dipped by an entire 9 percent to touch the bottommost figure in eight years. The bank made only a slight comeback to nearly 7.6 percent lower at 26p.
The first half of 2020 has seen the institution’s stocks drop by half as UK banks take the most heat from the global crisis.
The fiscal effects of the COVID-19 pandemic are spreading across banks as borrowers struggle to pay debts during tough economic times.
Banks are taking measures to protect their bottom line even as the future remains unclear.
Payment industry guru Taylor Cole is a passionate payments expert who understands the complex world of merchant accounts and helps retailers get the cheapest merchant services. He also writes non-fiction, on subjects ranging from personal finance to stocks to cryptopay. He enjoys eating pie on his backyard porch, as should all right-thinking people.