Britain’s biggest mortgage lender, the first major British bank to report results that fully capture the period after the referendum, said underlying pretax profits were £1.9bn (€2.13bn) compared with £1.97bn a year earlier.
Lloyds’ chief executive Antonio Horta-Osório said he had not seen much impact on consumer or corporate activity from Brexit, but that in the longer run investment would be needed to counteract any economic slowdown.
“We strongly believe that the economy requires a fiscal stimulus in terms of infrastructure and housebuilding,” Mr Horta-Osório said, adding that he hoped the UK government would announce such investment in the chancellor’s autumn budgetary statement.
As late as August, some economists were predicting the onset of recession in Britain following the June 23 vote.
But recent data have suggested the economy and housing market remains upbeat, with a better-than-expected Purchasing Managers’ Index survey and robust demand for mortgages.
Lloyds shares, which have fallen by around a quarter since the June referendum, were trading around 1% higher yesterday.
The bank also booked a higher-than-expected £1bn charge to compensate customers mis-sold loan insurance and additional legal and compliance costs of £150m. Bad loan charges rose by a third to £204m in an early warning that some customers could be struggling to cope with post-Brexit economic uncertainty.
Lloyds also reported a £740m deficit in its pension fund, which has been hit by falling bond yields.
Some analysts said that the bank’s 13.4 core capital ratio, up from 13% at June 30, had been bolstered by an accounting change linked to how Lloyds valued its bond holdings.
Finance director George Culmer told reporters the bank would pay its special dividend if the core capital ratio was above 13% at the end of the year.
The bank has been linked with a possible bid for credit card company MBNA but Mr Culmer declined to comment on the speculation.
Rescued in a £20.5bn UK taxpayer bailout during the financial crisis, Lloyds said it welcomed a decision by the government to resume selling its remaining £3.6bn stake via a trading plan to institutional investors.