Lloyds Banking Group PLC said Thursday half-year profits narrowed, pinched by 1 billion pounds ($1.3 billion) of charges to compensate customers.
The U.K. retail bank said it made a half-year net profit of GBP1.3 billion, down 18% from GBP1.59 billion a year earlier.
The bank said that the U.K. economy continued to be "resilient" in the wake of the Brexit vote, but that consumer confidence was softening.
Lloyds's bottom line was hit by a number of provisions for conduct costs. The bank said it was putting aside GBP700 million in extra provisions to cover future payouts to customers sold insurance products they didn't need. The provision came after a U.K. regulator extended a deadline for claims until August 2019.
Lloyds also said it was putting in place a system to compensate customers who were overcharged when they fell behind on mortgage payments. It estimates this will cost GBP340 million.
Despite these charges the board recommended a dividend of 1 pence per share.
Chief Executive Antonio Horta-Osorio continued to play-down fears of an unsecured debt bubble in the U.K. saying debt levels remained "reasonable" and were lower than a decade ago. However, he said some firms were lending at risky levels and should be reviewed by regulators.
In recent months, U.K. consumer credit, which includes credit cards, has been growing at an annualized rate of more than 10%, over five times the rate of incomes. This has propped up the U.K. economy after the Brexit vote, but has raised fears that banks could be hit with big losses.
This month, Mr. Horta-Osorio outlined a management shake-up, signalling his intention to stay at Lloyds to implement the next leg of its strategic plan. The bank will outline its next plan in February, following years of reshaping after its taxpayer bailout in 2009. Earlier in 2017, the government finally shed the remnants of its investment in the bank.
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(END) Dow Jones Newswires
July 27, 2017 03:30 ET (07:30 GMT)