Lloyds are the latest bank to announce a quick return to profit.
The Lloyds Banking Group has returned to profitability after announcing a £1.6bn before tax profit in the first half of the year. This compares to a £3.96bn loss over the same period last year, largely due to its former HBOS operations.
But once again the return to profit was in part due to a fall in bad loan provisions falling from an eye watering £13.45bn to £6.5bn. I won’t dwell on this story too much but suffice to say it is good news for UK tax payers, and ordinary Lloyds shareholders, as they are increasingly likely to see a return on their stake in the banking group (41% in the case of UK tax payers).
But I am more interested in Bruce Packard’s comments as reported by Citywire. The Seymour Pierce analyst said the result is a 'profit in an accounting sense, rather than an economic sense, given the £132 billion of Government support the group is still receiving and the billions of wholesale funding with maturity of less than one year maturity.'
I made a similar point yesterday in my post Banks announce increase in profits but in relation to HSBC and Northern Rock. So again, while it's good news I’ll keep the champagne on ice for now.