Lloyds Banking Group (LON: LLOY) today reported higher than expected half-year earnings but announced 3,000 further job cuts, stressing that the UK’s vote to leave the European Union makes further cost cutting measures necessary.
The Group reported underlying profits were down 5% compared to the same period last year. However, the figure of £4.2bn beats analyst estimates by £200million.
Total net income was £8.9bn, 1% lower than in the first half of 2015 with net interest income up 1%, standing at £5.8bn and other income decreasing 5% to £3.1bn. The company also cited improved performance in the second quarter compared to the first.
Earnings per share decreased by 0.7p compared to the first half of 2015 to 3.9p.
Interim dividend however rose by 13% to 0.85p per share.
The company was also successful at cutting operating costs by 3% to £4.0bn with the cost/income ratio improving to 47.8% due to its’ ‘continuous cost initiative’.
Giving guidance on future cost cutting, Lloyds said it is set to target savings of between £1.0bn and £1.4bn by the end of 2017. With the purpose of protecting profits from post-Brexit shocks, it will accelerate its’ cost cutting measures further.
In addition to already announced 9,000 job cuts and 200 branch closures, it has proclaimed a further reduction of 3,000 jobs and a further 200 branches. The new move is expected to result in savings of as much as £400 million.
Full year cost/income ratio is expected to be lower than the figure of 49.3% in 2015.
Although the earnings results showed better than expected performance, the news of new job cuts and branch closures send Lloyds Banking Group (LSE: LLOY) share prices falling 2.4% in the first few minutes after market open.
Over the day Lloyds Banking Group (LSE: LLOY) share prices dropped further, to close at 52.5p (-5.83%).
