The banking group reported a £2.1 billion profit for the first six months of the year. This compares with a £456 million loss for the same period the previous year. Lloyds reported a drop in bad debts of 43% to £1.8 billion, which is a positive move, but the lender also put aside an additional £450 million for the mis-selling of payment protection insurance (PPI).
Traders welcomed the news, as the UK government owns a large minority stake in the bank, and when the company is nursed back to health the government will look to unwind its position. The current share price is 73p; the government’s breakeven price is 61p, so it is effectively making £2.7 billion on its stake in the lender. Some economists feel that Lloyds’ risk-taking ability is curtailed while the government is a large shareholder, so if there is any talk of the bank being fully privatised we could see institutional investors come back into the market.