Lloyds faces increasing customer debt

Lloyds TSB today reported an increase in the number of its high street customers having repayment difficulties.

However, the bank insisted it was on track for "satisfactory" profits in the first half of this year.

In a trading statement, Lloyds - the UK's fifth-biggest banking group - said bad debt charges would rise in the first half of 2005 as customers struggled to repay debts. It said consumer loan growth would be slightly slower than in recent years.

In line with its rivals, the group announced that its retail arm had made greater provision to cover the rise in the number of customers in arrears than a year earlier. It said this had been offset by a lower provision in its corporate lending operations.

Lloyds, which owns the Scottish Widows and Cheltenham & Gloucester brands, has around 15 million personal customers and more than 2,000 branches.

In March, it announced a 20% fall in annual pre-tax profits to ?3.5bn, although the decline reflected the impact of businesses sold in 2003, which had contributed almost ?1.2bn to the bottom line a year earlier.

Profits from continuing operations increased by 10% to ?3.4bn as all the Lloyds divisions improved their performance.

In today's update, the chief executive, Eric Daniels, said the group was continuing to move towards its objective of sustained earnings growth, despite "a slowing consumer environment". He added that Lloyds was "on track to deliver a satisfactory trading performance".

The statement said the high street division was expected to achieve healthy levels of customer lending and deposit balance growth during the half year. "The rate of consumer lending growth in the first half of 2005 is, however, expected to be slightly lower than the double-digit growth rates experienced in recent years," it added.

Lloyds said it had also registered "meaningful gains" in business banking and corporate markets, while its strong cost performance of recent years had continued into the first half.

Last month, Barclays warned that bad-debt provisions were faster than forecast because of credit card arrears.

Reuters said share prices in all the mainstream banks, including Lloyds, fell today on the FTSE 100.