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Lloyds Banking Group is a national treasure: a state-backed cash dispenser to the people, injecting £17bn worth of payment protection insurance compensation into the economy, stimulating post-crisis consumer spending, and making the government’s austerity measures that bit more politically bearable.
It’s a wonder the EU hasn’t deemed this a breach of the state aid rules – for helping retailers, not banks. And it’s a surprise that France hasn’t thought of something similar, given the likelihood of mis-selling by bancassurers.
So popular have Lloyds handouts proved that the Financial Conduct Authority said the group processed 5,400 insurance complaints for every 1,000 policies sold. Talk about generous. Evidently, only fools and Black Horses work.
But, sadly for those still seeking a new 4K widescreen TV, both Lloyds’ state backing and its PPI payouts are coming to an end.
This morning, the bank made only an extra £350m provision for PPI – which reflects a new requirement to contact customers who have previously had their claims turned down, rather than any continuing flow of new payouts
And, last week, the government finally recouped all of the £20bn it ploughed into Lloyds during the financial crisis, so its remaining 2 per cent stake can now be sold off as pure profit for the government – making Lloyds a boring, normal bank again.
So boring that, in the first quarter of this year, it delivered an increase in underlying profit to £2.1bn with an underlying return on tangible equity of 15.1 per cent. On a statutory basis, this translates to profit before tax of £1.3bn, and a return on tangible equity of 8.8 per cent. Investec thinks it will be the only UK bank generating a 10 per cent return on tangible equity before 2020.
In terms of its capital position, Lloyds said it maintained a CET1 ratio of 14.5 per cent, before dividends.
For patient shareholders, then, the future looks a lot better, with the bank confirming that it is on track to hit its financial targets for 2017: a net interest margin close to 2.8 per cent, a cost/income ratio of around 45 per cent, and a statutory return on tangible equity of between 13.5 and 15.0 per cent in 2019.
Chief executive António Horta-Osório said:
We continue to make good progress against our strategic priorities of creating the best customer experience; becoming simpler and more efficient; and delivering sustainable growth.
Shareholders in AstraZeneca have also been asked for their patience. Chief executive Pascal Soriot, has been saying for some time that 2017 could be a “defining year” if drug trials prove positive by the summer. But a few months ago he also he admitted there may be an “uncomfortable period” if there are no conclusive data until 2018.
As the Lombard column suggested in February, investors valuing the company on its future pipeline rather than present cash flows — and Mr Soriot says there are “more and more” of these — may need something to calm the nerves.
This morning, Astra sought to provide it with news of a number of successes in the late-stage pipeline since its last results announcement. In addition to positive data for Lynparza in ovarian and breast cancer, it also announced full approvals in the US and Europe for Tagrisso in lung cancer and launched the medicine in record time in China.
But total revenue fell 12 per cent to $5.4bn, mainly due to a 13 per cent fall in product sales related to the expiry of the US patent for its blockbuster Crestor drug.
Mr Soriot said:
The Total Revenue performance reflected the transitional impact of recent patent expiries, which is expected to recede in the second half of the year. Importantly, we anticipate the significant progress of the pipeline to continue, including our immuno-oncology and targeted treatments.
As a result, reported earnings per share fell by 17 per cent, and financial guidance for 2017 was confirmed: a low to mid single-digit percentage decline
Cobham shareholders have had their patience tried in recent times, as the defence group issued five profit warnings in the space of the 16 months. This morning, at least, the company was able to assure them that first quarter trading performance has come in line with expectations.
Cobham said it had now started a “review of the breadth and shape of its portfolio and expects to provide an update to the market in its interim results expected to be published on 3 August”.
In the meantime, the FTSE 250 group’s overall expectations for 2017 remain unchanged after the its first quarter performance.
And, finally, takeaway food chain Pret a Manger has reported 50 new store openings and 15 per cent rise in sales to £776m – despite trying the patience of customers with such abominations as coconut porridge and vegetable sandwiches.
Earnings before interest, tax, depreciation and amortisation rose 11 per cent to £93m. Clive Schee, chief executive, said the chain planned to open its 500th store in the next 12 months and was intent on “furthering our measured expansion in both existing and new markets”.
There is no accounting for taste.
FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.