UK bank Lloyds sinks into first-half loss on pandemic

The lender said in a statement that it suffered a loss after taxation of £234 million in the first half of 2020 compared with a year-earlier profit of £1.94 billion, warning the deadly COVID-19 outbreak was having a “profound” effect on the global economy.

LBG’s impairment charge — comprising £2.4 billion in the second quarter and £1.4 billion in the first quarter — came one day after rival UK bank Barclays took a similar hit of £3.7 billion and warned of a possible second wave of the virus.

The cash should help both lenders weather the increased risks that customers may not be able to repay bank loans on the back of the coronavirus-induced recession.

“The impact of the coronavirus pandemic in the first half of 2020 has been profound on the way we live our lives and on the global economy,” said Lloyds’ chief executive Antonio Horta-Osorio in Thursday’s earnings release.

“We remain fully focused on helping our customers and the UK economy recover, in collaboration with Government and our regulators.

Britain’s sharp economic downturn was sparked by the three-month nationwide lockdown on March 23 which was not relaxed until early June.

Turning to the outlook, LBG warned it expected to book a coronavirus-linked impairment charge of between £4.5 billion and £5.5 billion for the whole year.

“There have been early signs of recovery in the group’s core markets, mainly in consumer spending and the housing market, but the outlook remains highly uncertain and the impact of lower rates and economic fragility will continue for at least the rest of the year,” the bank noted.

“The group’s updated 2020 guidance reflects a proactive response to the challenging economic environment and is based on the group’s recently revised current economic assumptions, which have deteriorated since the first quarter.”