Lloyds Banking Group has scooped an estimated £700 million profit after unexpectedly getting back the entire £1.2 billion it lent to the Barclay family.
Being paid back what you’re owed is not, not really, a profit.
Now, if you’d written the loan down as lost, get repaid and therefore you reverse the provision, OK, we can “book that as a profit” but it’s not, not really, a profit.
Not a profit, but recovering written off debt is almost as sexy….
The £1200m was written down to £500m because it’s owed by a company that was in receivership. That’s a loss.
Now the £1200m has been paid, in cash, that reverses the loss and can be considered a profit.
FWIW I saw a suggestion on a finance site somewhere that Lloyd’s may now pay this out as a special dividend.
Cue Richard Murphy foaming about abusive accounting by Lloyds for manipulating its profits by provisioning in writing down dodgy debt. For he’s made exactly these sort of allegations before. So helpful when one has 20/20 hindsight.
‘CJN…
Lloyds Board are much more likely to “spend” it by increasing the size of the share buy-back scheme rather than paying an extra dividend to their long-suffering shareholders. More “dibs” for their mates in the trading houses that way!
I don’t suppose this ‘windfall ‘ will lead to an increase in the crappy interest in my savings account?
Baron Jackfield: looks like you’re right:
https://www.ii.co.uk/analysis-commentary/windfall-lloyds-bank-shareholders-and-barclays-stock-sale-ii530093
I don’t suppose this ‘windfall ‘ will lead to an increase in the crappy interest in my savings account?
No. And it shouldn’t.
Firstly, while it looks like a big number, evened out across all accounts, how much difference is it actually?
Secondly, did they drop the interest when the loan was written off? If not, then why would they raise it when they unexpectedly get it back?