Lloyds Bank hands out its biggest half-year dividend since Covid hit

Lloyds Bank has handed out its biggest half-year dividend since 2019 despite signs customers are starting to struggle. 

As profit before tax hit £3.7bn in the first half of the year – higher than the £3.2bn expected – the UK’s biggest mortgage lender said it would bump up its interim payout from 0.67p per share last year to 0.8p. 

The £548m dividend will come as a boost to millions of shareholders, many of whom were customers of the Halifax Building Society, which became part of Lloyds in 2009. 

But the bank warned storm clouds were gathering as inflation hits household budgets. 

Around 20pc of Lloyds’ 26m customers are altering their spending habits, chief executive Charlie Nunn said as it unveiled secondquarter results, with customers cutting down on ‘big-ticket’ items such as fridges, washing machines and computers. ‘

The average family in the UK was spending £89 a month more in June 2022 on energy, food and fuel than in June 2019,’ Nunn said. He noted that 2.2m subscriptions, from Netflix to gym memberships, have been cancelled since last summer. 

Around 1pc – 260,000 customers – were ‘really struggling to make ends meet’. This isn’t yet evident in Lloyds’ loan book, with no sign of a rise in people falling into arrears. But it is more pessimistic on the outlook – it thinks growth will be flat for the next few months, and next year will only reach 0.5pc. 

House prices will be ‘basically flat’ for 12 to 18 months, it said as it set aside £377m in the first six months of the year to cover loans that turn sour. The £3.7bn profit was slightly lower than the £3.9bn of last year, a figure boosted by it releasing more than £700m it had squirrelled away during Covid to cover losses. 

Profits have been higher as Lloyds reaps the rewards of higher interest rates. The Bank of England has boosted its base rate from 0.1pc in December to 1.25pc to curb the cost of living. This means banks can charge higher interest rates to mortgage holders and borrowers without upping savings rates by as much. The upgrade sent shares up 4.1pc.

Credit Suisse’s chief executive Thomas Gottstein has stepped down. The troubled lender released ‘disappointing’ results, losing £1.4bn in the first half of the year from a profit of £48m in the same period 12 months earlier. It has been hit by a string of scandals, and has suffered a fall in dealmaking and an increase in the sum of money it set aside to cover lawsuits. Gottstein will be replaced by Ulrich Korner.