Lloyds Banking Group has reported a 95% fall in first quarter profit as it counts the cost of the coronavirus to the economy.
Profits of £74m for the January-March period were down from £1.6bn in the same period a year ago, as the UK-focused lender set aside £1.43bn to cover the expected slump caused by the coronavirus pandemic.
The group, which owns Halifax and Bank of Scotland as well as Lloyds Bank, sees the economy shrinking by as much as 7.8% this year under a “severe downside” scenario.
Lloyds chief executive Antonio Horta-Osorio said: “The economic outlook is clearly challenging and uncertain with the longer-term outcome dependent on the severity and length of the coronavirus pandemic and the mitigating impact of government and other measures in the UK and across the world.”
Banks across the world have been putting aside billions to cover the economic impact of the global crisis with Barclays taking a £2.1bn first quarter hit and HSBC saying it could cost up to $11bn (£8.7bn) for the full year.
The sums account largely for the increased likelihood of impairments – borrowers defaulting on loans.
Banks are also being squeezed by big interest rate cuts which make it harder for them to make profits.
Lloyds, as Britain’s biggest mortgage provider and one of its biggest lenders to business, is seen as a bellwether for the domestic economy.
It said: “Given the group’s clear UK focus, its performance is inextricably linked to the health of the UK economy and the group will inevitably be impacted by the nationwide lockdown related to coronavirus which has already started to have a significant impact on the UK economy.”
Shares were 4% lower in morning trading.
Britain’s banks have been criticised for slow progress in their role supplying £330bn of state-backed loans to businesses hit by the pandemic.
Lloyds said it had provided 880,000 loan repayment holidays across all its product lines and issued 3,752 loans totalling £500m via the Coronavirus Business Interruption Loan Scheme (CBILS).
But it is still lagging behind rivals NatWest, HSBC and Barclays, despite being Britain’s biggest provider of loans to small companies.
The Lloyds results came as latest figures from industry body UK Finance showed the sector had provided a total £4.1bn in loan through CBILS so far.
It said just under half the 52,807 completed applications received to date had been approved so far.