Lloyds’ results analysis: Payment holidays reach 1.1m, as loss provisions hit £7.2bn 

The results also show that Lloyds has had to make extra provisions for regulatory issues, relating to arrears handling, taking the total allowance to £1bn. The group made an extra allowance of £28m during the half-year to June 30, for arrears-handling activities, bringing the total provided to date to just over £1bn. Lloyds said the unutilised balance for this, as at June 30 2020, was £78m.

In one of the more recent payouts the group had to make related to mortgage arrears handling. The FCA fined Lloyds Bank, Bank of Scotland and The Mortgage Business over £64m for failures over their historic handling of mortgage arrears. The regulator said the banks have estimated that they will have paid out about £300m in redress to 526,000 customers and that the programme is nearly complete.

Payment holidays

The results reported that Lloyds has granted over 1.1 million payment holidays to retail customers and around 33,000 capital repayment holidays to small businesses and corporates.

Of the 1.1 million, 750,000 are still in force, and 69% have restarted payments.

Payment holidays have also been granted across all other main consumer finance and unsecured products, with around 126,000 in motor finance, 234,000 in personal loans and 299,000 on credit cards. Of the total mortgage payment deferrals granted, 279,000 are still going.

There are 225,000 payment deferrals still in place on credit cards. Some 74% customers on matured card deferrals have resumed payments, while 67% have resumed payments on their loans and 59% have done so on motor finance deferrals.

Lloyds said that, across all products, customers who sought to extend their payment holiday are typically of a lower credit quality and tend to have higher average balances, and lower credit scores, than customers who have never taken a payment holiday.

Mortgages

The report shows that mortgages account for the largest proportion of the payment holidays, with a total of around 472,000 granted.

As at 24 July, nearly 41% (around 193,000) had matured, with 72% of those having resumed repayments. Some 23% have extended their payment holidays and the remainder are in early arrears.

According to the report, the impairment charge for the first half of 2020 on secured lending was £603m, compared with a £38m release for the same period in 2019, largely as a result of the change to the economic outlook, and an additional reduction in house price forecasts.

The group has suspended all repossession activity on mortgage accounts until October 31 2020. As a consequence of this, the volume of cases in late stage arrears has increased.

Credit cards

The results show that the impairment charge in Lloyds’s credit card book increased by £389m to £656m in the first half of 2020, a 145% increase. This was largely due to updates to the group’s economic outlook.

While the credit card portfolios were the last to receive payment holidays, Lloyds said it has seen a large uptake in the second quarter of 2020, which has resulted in very low levels of flows into arrears.

Motor finance

The impairment charge in Lloyds’s motor finance business increased to £241m for the first half of 2020, compared to £104m for the same period in 2019. The bank anticipates higher levels of defaults and a severity of losses in motor finance, given anticipated reductions in used car prices.

Employees

As the group has long since transformed operations since lockdown, Lloyds reported that around 50,000 staff are working from home across the whole group, and 19,000 of those are in retail banking, with over 12,000 laptops distributed to colleagues.

Over 120 million proactive letters, emails and SMS messages have been sent to customers outlining available support with over 600,000 proactive outbound calls to vulnerable and elderly customers. A £500 interest-free overdraft buffer was automatically made available to over nine million customers.

Economic outlook

The H1 report also shows that the group has prepared for an economic scenario resulting in a GDP drop of 17.2% in 2020, and a peak unemployment rate of 12.5% in the second quarter of 2021.