LONDON (REUTERS) - Lloyds Banking Group said on Thursday (July 28) it would accelerate its cost cutting plan to help offset a more testing economic environment and a likely drop in demand for credit caused by Britain's vote to quit the European Union.
Britain's largest retail bank announced plans to save £400 million by end-2017 by axing a further 3,000 jobs and closing an additional 200 branches to protect its earnings and ambitious dividend profile against lower-for-longer interest rates.
Chief executive officer Antonio Horta-Osorio is searching for ways to prop up shareholder returns and sustain profit growth in Lloyds' core UK consumer and commercial lending market, still reeling from the Brexit result on June 24.
"Given the uncertainty, it is too early to determine the impact on our formal longer term guidance at this stage," the bank said in a statement. "However, while the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in future years than previously guided."
So far this year, Lloyds has already said it would cut about 4,000 positions from its 75,000-strong workforce. The bank also said it would look to streamline its non-branch property portfolio by around 30 per cent by the end of 2018.
Lloyds reported a first-half statutory pretax profit of £2.45 billion (0S$4.47 billion) in the six months to June 30, more than double the sum achieved in the same period last year.
That figure was just ahead of the £2.35 billion average estimate of 15 analysts surveyed by the bank. Income for the first half of the year came in at £8.9 billion, just below the 2015 figure.
The bank said its net interest margin (NIM) - a key performance measure that tracks the difference between what Lloyds receives in interest and lends out to customers - had widened to 2.74 per cent over the period. It affirmed previous guidance of about 2.7 per cent for the full financial year.
But a rise in impairments by almost a third to £254 million took the shine off the profit beat and robust NIM result and offered a glimpse into tougher times to come.
Lloyds, rescued in a £20.5 billion taxpayer bail-out during the financial crisis, is the first major British bank to report results since the referendum and is the most exposed to any downturn in the British economy.
But as the vote to leave the EU came at almost the end of the bank's fiscal first half, the likely impact on lending volumes will remain unclear until the third quarter and beyond.
Lloyds said it will pay an interim dividend of 0.85 pence, up 13 per cent on last year.