Lloyds has set aside £3.8 billion for future loan losses, almost £1 billion more than the £2.9 billion than the City analysts had expected
The banking sector has had its hands tied behind its back this year, making it almost impossible to do business normally, said Russ Mould from AJ Bell.
“More than a million payment holidays have been granted to Lloyds’ customers because of the pandemic. Net interest margins – the difference between the money it earns from loans and that paid out on deposits – have fallen amid low Bank of England interest rates. It has also made advance payments for life and critical illness claims to support customers in financial difficulty.
“Furthermore, the bank has booked billions of pounds in provisions for bad loans because of the worsening economic outlook with lower GDP and higher unemployment.
“To make matters worse, shareholders have been denied their valuable source of income, which for many is the primary reason to own the stock. Dividends are off the menu for the entire banking sector for now.
“Lloyds needs consumer spending and the housing market to pick up before its outlook can improve.
“The latest results are thoroughly miserable, and it is certainly going to be a tough period ahead.
“However, the whole banking sector is now well versed in crisis management and will benefit from being in a stronger financial position versus 12 years ago when the global financial crisis damaged the industry.”