British bank Lloyds says net profit soars

 A man passes a Lloyds logo outside the entrance to on office of Lloyds Banking Group in the City of London on July 28, 2016.
A man passes a Lloyds logo outside the entrance to on office of Lloyds Banking Group in the City of London on July 28, 2016.PHOTO: AFP

LONDON (AFP) - Lloyds Banking Group announced soaring annual profits Wednesday on lower charges linked to an insurance scandal, as it awaits a full return to the private sector following a state bailout.

Net profit surged more than four times to £2.0 billion (S$2.84 billion) in 2016 compared with net profit of £466 million a year earlier, LBG said in an earnings release.

"We have delivered strong financial performance in 2016 as we continue to make good progress against our strategic priorities," group chief executive Antonio Horta-Osorio said in the statement.

LBG said it took another £1.0-billion hit to compensate customers who were mis-sold insurance, although this was much reduced compared with a bill of £4.0 billion in 2015 regarding the same issue.

Lloyds' compensation for mis-sold payment protection insurance (PPI) now totals more than £17 billion - far in excess of other British banks caught up in the long-running scandal.

In 2011, British banks lost a high court appeal against tighter regulation of PPI, which provides insurance for consumers should they fail to meet repayments on a credit product such as consumer loans, mortgages or payment cards.

PPI became controversial after it was revealed that many customers had been sold it without understanding that the cost was being added to their loan repayments. British authorities subsequently banned simultaneous sales of PPI and credit products.

Lloyd's update meanwhile comes with it close to its full return to the private sector.

The British government is no longer the biggest shareholder in LBG after recently reducing its stake to below five per cent.

The government rescued Lloyds with £20 billion of taxpayers' money at the height of the global financial crisis in 2008, since when the state has sold down its original stake of 43 per cent.

"The combination of the progress we have made towards our strategic priorities and our strong financial performance has enabled the UK government to further reduce its stake in the group to less than five percent... returning over £18.5 billion to the UK taxpayer since 2009," LBG said Wednesday.

It means that US fund manager BlackRock is now the bank's single biggest stakeholder.