Higher than expected provisions and Irish debt impact Lloyds

As Lloyds announce disappointing Q1 results Graham Spooner, investment adviser at The Share Centre, explains what this means for investors.

"Lloyds' profits for Q1 fell sharply. The bank that is 40% owned by the tax payer and still finding its feet after the acquisition of HBOS, reported a fall in pre tax profits from £1104m to £284m on a combined business basis.

"The main concern is the larger than expected provision of £3.2bn to cover the costs of mis-selling payment protection insurance. Investors will be hoping this is the last of these charges and the bank can begin to move forward.

"Troubles remain in Ireland and this was to blame for the £500m larger than expected rise in provisions against property loans. The impairment charge was £1144m for Q1 as the bank allowed for a further 10% fall in commercial real estate prices.

"As early morning trading sees the share price fall 5% to 55p, these results enforce our view that investors holding onto Lloyds in the hope of a recovery will have to be very patient indeed.

"We currently see no reason for investors to rush to the banking sector. However, for investors seeking exposure to this turbulent sector our preferred play is Barclays, who unlike Lloyds, is able to offer a dividend and has stronger profit growth and international exposure."