Lloyds Banking Group said on Thursday it would accelerate its cost cutting plan to help offset a more testing economic environment and a likely drop in demand for credit caused by Britain’s vote to quit the European Union.
Britain’s largest retail bank announced plans to save 400 million pounds by end-2017 by axing a further 3,000 jobs and closing an additional 200 branches to protect its earnings and ambitious dividend profile against lower-for-longer interest rates.
“Given the uncertainty, it is too early to determine the impact on our formal longer term guidance at this stage,” the bank said in a statement.
“However, while the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in future years than previously guided.”
Lloyds reported a first-half statutory pretax profit of 2.45 billion pounds ($3.3 billion) in the six months to June 30, more than double the sum achieved in the same period last year.
That figure was just ahead of the 2.35 billion pound average estimate of 15 analysts surveyed by the bank. Income for the first half of the year came in at 8.9 billion pounds, just below the 2015 figure.
The bank said its net interest margin (NIM) – a key performance measure that tracks the difference between what Lloyds receives in interest and lends out to customers – had widened to 2.74 percent over the period. It affirmed previous guidance of about 2.7 percent for the full financial year.
But a rise in impairments to 254 million pounds took the shine off the profit beat and robust NIM result and offered a glimpse into tougher times to come.
The bank said it will pay an interim dividend of 0.85 pence, leaving it with a common equity tier 1 ratio, a measure of financial strength, of 13 percent after the payout.