Bailed-out Lloyds to reveal profit

Part-nationalised Lloyds Banking Group is expected to reveal its first annual profit since being bailed out at the height of the financial crisis.

The group, which is 41% owned by the taxpayer, is predicted to report pre-tax profits of £2 billion – a marked improvement on the £6.3 billion loss in 2009.

Lloyds has already revealed its bonus plans, with outgoing chief executive Eric Daniels being awarded £1.45 million for 2010, so the City is likely to focus on trading.

The bank had a mixed year after it returned to profit at the half-year stage with a £1.6 billion surplus, but later warned over the impact the Irish debt crisis would have on its performance.

It increased expectations for bad debt losses in December to £4.3 billion for 2010, from a previous estimate of £1.6 billion reported in June. This raised concerns, given that its return to health has been driven by lower bad debts.

A further blow came last week when lender Halifax, owned by Lloyds, revealed it would have to pay £500 million in compensation after it admitted confusing 600,000 customers about whether a cap on its standard variable rate mortgage applied to them. However, this will impact on the group’s 2011 results.

The figures will be the last presented by Mr Daniels before he hands over to former Santander UK chief executive Antonio Horta-Osario in March.

Mr Horta-Osario faces a number of trading challenges going forward, according to analysts at Credit Suisse, with margins hard to come by across the entire industry.

Lloyds is also at the mercy of the Independent Banking Commission, which could recommend splitting Lloyds in order to improve competition.

The bank’s full-year results follow figures from Barclays and Royal Bank of Scotland so far in this year’s earnings season. On Thursday, fellow taxpayer-backed player RBS said its recovery was ahead of schedule as it slashed annual losses in 2010. RBS, which is 83% owned by the taxpayer, posted losses of £1.1 billion in 2010 against a £3.6 billion loss in 2009.