Lloyds on track despite 'subdued' loan demand

2nd Nov 2010 07:05

Better margins at its core banking business and bad debts under control kept state-controlled bank Lloyds' recovery on track over the past three months, despite 'subdued' loan demand."We continue to monitor the economic environment carefully but notwithstanding this we are pleased to be reporting good progress against our strategic priorities. Based on the group's current economic and regulatory assumptions, we continue to expect the group to deliver a good financial performance for the full year," outgoing chief executive Eric Daniels said.In the core banking business, Lloyds expects a modest improvement in banking net interest margin in the second half of 2010, helped by lower costs. The bank is on track to achieve its target of circa £1.3bn of synergies and other operating efficiencies from its ill-fated merger with HBOS by the end of 2010 and £2bn by the end of 2011, it said.Impairments, or bad debts, have continued to decline and for the full year the level is expected to be in line with Lloyds' recent indications. Wholesale impairments will be lower than expected offset by higher Wealth and International charges, originating in Ireland and Australia primarily.Lloyds, along wth other banks, has been heavily criticised by the current govenment for not lending enough, but said today that demand for new lending remains "subdued" and that loan repayments are strong."On a net basis, however, continued high levels of debt repayment from corporate and retail customers has resulted in a continued reduction in overall banking assets. This, along with a reduction in non-relationship assets, has led to a further modest reduction in risk weighted assets, compared to the first half," it said.Gross mortgage lending during the third quarter was up on the same period last year. New mortgage lending continues to be focused on supporting the home mover and first time buyer markets. Customer deposits rose in the quarter, while demand for corporate credit remained "relatively subdued", Lloyds added."Core income growth, margin improvement, integration savings, funding progress and balance sheet reduction all remain on target, giving us confidence that we will deliver a good financial performance for the current financial year," Daniels added.