Lloyds’ profits lift dividend hopes

Lloyds, which is 25 per cent owned by the Government, said it made an underlying profit of £1.8bn in the first quarter, helped by a five per cent fall in costs to £2.3bn.

The bank ​also said it expects to launch a stock market float of the revived TSB business within eight weeks.

Lloyds, which owns Halifax Bank, has seen a turnaround in its fortunes since the financial crisis.

The bank, which has cut costs by slashing jobs and exiting many of its international businesses, needs permission from the Bank of England to restart dividends.

It said it will apply to the Bank in the second half of this year which means investors could see dividends reinstated next year.

Lloyds’ finance director George Culmer said: “I would go into those discussions with confidence about our business and about our prospects.”

Before the financial crisis Lloyds was one of the highest dividend payers in the UK, paying out just over half of its profit in 2005 and 2006.

But the bank has not made a payout since the crisis hit, when the taxpayer pumped in £20bn to keep it afloat. That left the Government with a 41 per cent stake, which it has started selling off at a slim profit, leaving it with a 25 per cent stake.

Lloyds said the flotation of TSB will include a retail element for private shareholders, pleasing many small investors who have been excluded from a number of recent IPOs.

The group was ordered to spin off more than 600 branches under EU rules on state aid following its takeover of HBOS at the height of the financial crisis.

It has already rebranded the sites as TSB after the collapse of a deal to sell them to the Co-op.

Chief executive Antonio Horta-Osorio said: “We are now well placed, subject to final regulatory approval and market conditions, to launch the IPO in the summer of this year.”

Mr Culmer said: “We would be hopeful that there would be an announcement ahead of the end of June.”

Halifax also reported a strong first quarter, with strong demand for lending in mortgages and unsecured lending.

Halifax’s managing director David Nicholson said: “Lending is up over 20 per cent on the first quarter last year. The market and customer confidence is driving it.

“People are starting to buy things again. The car market in March was the strongest in 10 years.

“The mortgage market is very much in demand across the country. House price growth looks fairly firm across all regions,” he added.

Halifax saw good demand from people switching bank accounts and signed up 65,000 new customers in the first quarter, making it the most switched to bank in the UK.

Lloyds said it lent £2.6​bn to first-time home ​buyers in the first quarter, including £342​m through the Government’s Help to Buy scheme.

Loans to small and medium businesses grew by ​five per cent​ in the last 12 months.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “Lloyds is often seen as a proxy for the UK economy, and although they are inextricably linked, both are beginning to prosper after a long period of austerity.”