Lloyds, 40 percent owned by the British government after being bailed out during the 2008 credit crisis, slumped to a loss of 607 million pounds in the three months through September, adding to a first-half loss of 3.25 billion pounds.
Its earnings were hit by lower banking margins and higher funding costs and Lloyds said it may not meet some of its medium-term income targets until after 2014. However, it maintained its full-year guidance on margins and for a reduction in losses on loans that have turned sour.
Lloyds shocked investors last week by announcing 47-year-old Chief Executive Antonio Horta-Osorio was taking a break due to stress-related illness, leaving a potential power vacuum at the top of Britain’s biggest retail bank.
Tim Tookey, the finance director who is due to leave the bank in February for insurer Resolution , is serving as interim CEO, adding to worries that a major executive shake-up by Horta-Osorio has left Lloyds thin at the top at a time when it faces several headwinds.
Tookey said its 47-year-old chief executive was still expected back before Christmas.
“It’s very much business as usual. Nothing has stopped. The delivery of all our strategic initiatives continues ... there’s nothing that’s being stopped or paused while we go through these few weeks before we expect Antonio to return,” Tookey said.
Tookey also said Lloyds was closely monitoring the economic turmoil in the eurozone, with fears growing over Italy following Greece’s economic slump. “We’re watching the general eurozone situation with a lot of caution,” he said.
Lloyds cut its exposure to Italian banks by a third to 1.2 billion pounds in the third-quarter. It also trimmed its exposure to banks in Spain, Portugal and Ireland.
Its exposure to banks and asset-backed securities in Belgium, Greece, Ireland, Italy, Portugal and Spain was 5.3 billion at the end of September, against 6.2 billion at the end of June. It had barely any sovereign debt of those countries.
Lloyds, whose shares fell 3 percent on Monday and have slumped by around 60 percent over the last year, rose around 5 percent in early trade as its positive outlook on margins helped offset concerns over the quarterly loss and the CEO’s illness.
“Management reiterates full-year margin guidance of 2.05 percent (vs 2.05 percent in Q3) and full-year provisions guidance (9.9 billion pounds). We see this as a small positive for investor sentiment on the stock in the near term,” Christopher Street Capital said in a research note.
Lloyds reiterated it hoped to make a decision over 632 retail branches which regulators have ordered it to dispose of by the end of the year, in a deal which Lloyds has code-named “Project Verde.”
Lloyds plans to sell the branches, attracting interest from new bank venture NBNK and Co-Op Financial Services who have said they will bid, but Lloyds could also list them or spin them off if offers are too low.
