uSwitch.com: Lloyds TSB’s profit announcement

Following Lloyds TSB’s profit announcement totalling £4.2 billion for the group (an 11% increase of £428 million since 2005), Nick White, Director of Financial Services at independent price comparison and switching website uSwitch.com, comments:

“Just one week into the banking reporting season and Barclays, Alliance and Leicester and Lloyds TSB have reported total profits of £11.96 billion with total write offs (£3.814 billion) representing a staggering 32% of profits. Lloyds TSB and Barclays have displayed a slow down in the growth of bad debts written off in 2006 compared to 2005 (totalling £3.709 billion for both groups last year), but this problem will not go away overnight.

“Lloyds TSB wrote off £740 million on loans and overdrafts and £490 million on credit cards last year, a combined total of £1.23 billion. This appears to account for almost 100% of the groups’ total write offs and it is safe to say that these two areas are clearly the most problematic lending areas within the group and we would hope to see Lloyds TSB tightening lending practices in the next year.

“Lloyds TSB’s current account fees went up by 10% (£59 million) last year to £652 million. This is hardly surprising given that Lloyds TSB has pounded customers with a raft of money making changes to their current account portfolio over the past 12 months which may have contributed to this figure. These include:

Increasing the Premier Direct packaged account monthly fee from £15 to £25.

Two increases to authorised overdraft rates in just three months (September and December) by an average of 1.05%.

Removal of the £10 ‘buffer’, which enables customers to exceed their authorised overdraft limit without incurring penalty charges if the unauthorised overdraft is less than
£10 for all current account customers.

No longer allowing customers to have one bank charge per year waived as a gesture of goodwill.

“All of the write off figures reported to date fully support our recent campaigns which highlighted the issue of irresponsible lending within both the credit card and personal loans market. Our research found that 89% of credit card applicants in the UK did not have to prove their income in the past year and £11.9 billion was advanced in personal loans without any income checks.

“More now than ever before, consumers should be keeping a very close eye on the small print and the correspondence they receive from their bank. With the impending OFT investigation into current account charges, banks will continue to claw back any lost revenue streams in anticipation of the outcome of the investigation. By voting with their feet, customers can make sure they are not being ripped off by underhanded revenue generating tactics which simply add to these profits."