Lloyds TSB banks on a profit

Getting the annual results out on 15 February will come as a welcome distraction to Lloyds TSB FD Michael Atkinson.

A good part of his year will have been spent chasing the takeover of Abbey National – a project sure to have sapped the resources of the finance function within the bank as it moved to support the bid for Abbey.

That said, Atkinson will have had other issues to deal with but this week’s results are expected to be good.

Last year, operating profits were up 7% as pre-tax profits rose to £3.8bn from £3.6bn. That’s a pre-tax profit margin of around 25%, quite a success but perhaps not surprising given the bank has boasted 16 million customers since the merger of Lloyds Bank with TSB in 1995.

Of course Atkinson’s job is also about consolidating the accounts, which involves bringing together the results of the UK retail banking services along with mortgage provider Cheltenham & Gloucester, a number of overseas operations and, as of March 2000, Scottish Widows, the insurance company.

Atkinson will be concerned to see whether the sale of mortgages has been affected by the rise in house prices, and whether the fall-out from the travails of Equitable Life has adversely touched the results of Scottish Widows.

Other developments include a tie-up with accountancy firm Granth Thornton which now provides tax advice to Lloyds customers.

Two kinds of profits are now presented by the group. On the one hand the bank presents an operating profit which includes investment earnings calculated using longer-term rates of investment return.

On the other Lloyds gives a profit before tax (the headline result) which separately identifies short-term fluctuations in investment results.

Atkinson must now demonstrate that Lloyds is competing successfully in a consolidated and more competitive market.

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