Lloyds predicts profit for 2010

19th Mar 2010 07:05

Part-nationalised lender Lloyds Banking will be profitable on a combined businesses basis in 2010, chief executive Eric Daniels claimed Friday.In a short statement ahead of a presentation at the Morgan Stanley European Financials Conference later today, Daniels said trading in the first 10 weeks of 2010 had been "strong".The boss is pleased with the bank's performance against each area of recent guidance provided last month when the company reported a smaller than feared £6.3bn pre-tax loss."The banking net interest margin is trending in line with recent guidance and this has supported a good level of income growth, on a combined businesses basis and excluding last year's gains from liability management transactions," Daniels said. Costs are lower than at the same time last year, while impairment provisions are trending at lower levels than forecast, leading Lloyds to expect a better impairment performance than previously guided in both the retail and corporate businesses in 2010. Impairments were 21% lower in the second half of 2009 than in the first six months and a similar pace of half yearly improvement was expected through 2010, Lloyds told investors in February.It had also flagged a 'significant improvement' in the performance of its continuing businesses for this year and set a target of high single-digit income growth within two years. "Overall, based on the group's current economic and regulatory assumptions which remain unchanged since our recent 2009 preliminary results announcement, the group believes that it will be profitable on a combined businesses basis in 2010," Daniels concluded.Analysts at Killik Capital accept that the news is positive and will lead to upgrades to consensus forecasts, but they are wary."Momentum is clearly behind the shares at present, but we would reiteratethat Lloyds remains a pure play on UK economic growth, on which weremain cautious," it wrote in a note to clients Friday.It also worries about uncertainty over the prospect of regulatory change and its impact on capital adequacy. "Without clarity in this area, it is difficult to calculate the potential return on equity the banks can generate or an appropriate book value to benchmark valuation." The next update is due on 27 April.