Lloyds Banking Group has announced a new provision of £700 million for potential bad loans in light of the challenging economic conditions. Despite this, the bank managed to raise dividends to shareholders due to increased profits.
In the first half of the year, Lloyds reported pre-tax profits of £3.9 billion, surpassing the £3.1 billion achieved during the same period last year. The rise in profits was attributed to higher interest rates imposed on customers as a result of actions taken by the Bank of England to combat inflation.
While Lloyds has set aside additional funds, on top of the £1.5 billion from the previous year, to cover potential loan defaults, the bank is actively working with customers to manage their obligations and assisting those with savings in obtaining the best rates.
The financial sector has come under scrutiny for alleged rates profiteering, with concerns about slow increases in savings rates while quickly passing on higher mortgage costs. Other major lenders, such as Barclays and NatWest, are expected to report their progress later this week.
This set of results marks the final reporting before the implementation of a new rule on customer service, known as consumer duty. This rule requires all firms regulated by the Financial Conduct Authority (FCA) to demonstrate how they ensure positive outcomes for customers, including responsive customer service, clear communications, and fair value for money on products.
Lloyds also emphasized its commitment to supporting customers during the cost-of-living crisis, including providing guidance to more than 200,000 mortgage customers and engaging with over 550,000 business customers to promote financial resilience.