Lloyds profits cut by 95% as bad loans bite

Lloyds has defended itself against claims that it has not done as much as its rivals to support businesses as it unveiled a 95 per cent slump in profits to £74 million. Read more: Lloyds profits cut by 95% as bad loans bite

Lloyds profits cut by 95% as bad loans bite

Lloyds has defended itself against claims that it has not done as much as its rivals to support businesses as it unveiled a 95 per cent slump in profits to £74 million.

The collapse in quarterly profits from £1.6 billion a year ago was caused by a £1.4 billion provision for bad debts already coming through or expected by Lloyds in the next few months.

António Horta-Osório, Lloyds’ chief executive, said that most small and medium-sized businesses wanted loan repayment holidays or bigger overdrafts rather than the 80 per cent state-backed coronavirus loans to help them to cope with a collapse in revenues.

Lloyds, the UK’s biggest high street bank, which has a one-fifth share of the business banking market, said that it nonetheless increased those loans, having now approved 3,752 coronavirus business interruption loans with a value of £500 million. That brings Lloyds’ share of CBILs to about 14 per cent, up from 12.8 per cent a week ago.

Lloyds has also agreed £100 million of overdraft extensions for businesses and 24,000 capital repayment holidays. “By a wide margin, ten to one, SME customers prefer to ask for capital repayment holidays or overdraft extensions than term loans,” Mr Horta-Osório said.

Lloyds, which has a CET1 level of 14.2 per cent, will use its capital strength to support the economy, he added. “Unlike other banks, we do not see any trade-off between our CET1 level and risk-weighted average loan expansion. We think we can accommodate all lending demand. We don’t see any trade off,” Mr Horta-Osório said.

Banks have been told by regulators to “lean in” to the pandemic crisis by continuing to lend to customers. They have been given permission to eat into several capital buffers that sit above their regulatory minimum levels.

Lloyds is forecasting that GDP and house prices will both fall by 5 per cent this year, which could deteriorate to a 7.8 per cent drop in GDP and a 10 per cent decline in house prices if the economy suffers more severely.

The base case forecast reflects a “prudent view”, Mr Horta-Osório said. “There are two opposing forces: on the one hand the unprecedented coronavirus crisis; on the other, very significant and unprecedented positive measures from the government. Synthesising these two opposing, very opposing, forces is what we took into consideration when drawing up the scenario.”

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Lloyds profits cut by 95% as bad loans bite

Source : Business Matters More   

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Watchdog threatens legal action on holiday and cancelled wedding refunds

Firms that fail to refund people for holidays and weddings cancelled because of the coronavirus outbreak could face legal action by the consumer watchdog. Read more: Watchdog threatens legal action on holiday and cancelled wedding refunds

Watchdog threatens legal action on holiday and cancelled wedding refunds

Firms that fail to refund people for holidays and weddings cancelled because of the coronavirus outbreak could face legal action by the consumer watchdog.

The Competition and Markets Authority (CMA) says it will take companies to court if they flout the law.

It says four out of five complaints made to its Covid-19 Taskforce are about cancellations and refunds.

Issues include holidaymakers being pressured to take vouchers instead of refunds for accommodation.

Meanwhile, some wedding venues are refusing to refund any money.

The CMA said the holiday vouchers being offered can only be used during a more expensive period, while wedding venues are telling people to claim on their insurance.

At the same time, the CMA said some nurseries were asking people to pay very high sums in order to keep a place open for their child.

Consumer law requires that a full refund is offered if a business has cancelled a contract without providing any of the promised goods or services.

This includes if no service is provided because of restrictions during the current lockdown or if a consumer cancels because of the restrictions.

The CMA warning covers UK holiday accommodation and private events, but not the issue of refunds for cancelled flights – a subject that has caused widespread anger. That issue is regulated by the Civil Aviation Authority.

‘Distressed’

Adam French, consumer rights expert at Which?, welcomed the CMA’s move.

“We’ve heard from many distressed people who risk being left out of pocket for significant sums of money as they struggle to get refunds for cancelled weddings, private events, or holiday accommodation,” he said.

“It’s right the CMA investigates sectors that are skirting their legal responsibilities on refunds and cancellations by trying to rely on unfair and unenforceable terms and conditions.

“The regulator must be prepared to step in and take strong action against any businesses found to be breaching consumer law and taking advantage of consumers during these unprecedented times.”

Nurseries will be covered by the investigation, but providers say some have been forced to go to parents for financial support.

“Nurseries are being put between a rock and a hard place during this crisis. They are being asked to remain open and run at a loss to provide emergency childcare, while those who can’t open still face staffing and other costs which the government’s support doesn’t fully cover,” said Purnima Tanuku, chief executive of the National Day Nurseries Association.

“As a result of a lack of insurance cover, delays to government support schemes and chronic underfunding of childcare places we know that some nurseries have asked parents for contributions to keep their businesses afloat.”

Read more:
Watchdog threatens legal action on holiday and cancelled wedding refunds

Source : Business Matters More   

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