LONDON, July 26 (Reuters) - Lloyds Banking Group reported a higher charge for troubled loans and missed first-half profit expectations as Britain's economic chills weighed on its finances and upped pressure on management to do more to help struggling savers.
Britain's biggest mortgage lender reported pre-tax profit of 3.9 billion pounds ($5 billion) for the six months to June, up from 3.1 billion a year earlier but slightly below the 4 billion average of analyst forecasts compiled by the bank.
Lloyds shares fell 5% in early trading against a flat FTSE 100 index.
Banking analysts at JPMorgan said a higher than expected charge for potentially soured loans - up 76% to 662 million pounds - and declining loan volumes would trigger downgrades of Lloyds' performance for the year.
Lloyds reported an improved interim ordinary dividend of 0.92 pence per share, up 15% on the prior year and equivalent to returning 594 million pounds to shareholders.
The lender did not, however, offer a fresh buyback of its shares, adding to broader investor disappointment.
Lloyds and other banks are under pressure to help depositors following a long run of Bank of England rate rises, particularly as the cost of mortgages has risen at a much faster pace.
"A 15% hike to its dividend is good news for shareholders, but there will almost inevitably be more questions over rates offered to savers in the current environment," said Zoe Gillespie, investment manager at RBC Brewin Dolphin.
Lloyds shares fell 5% in early trading on Wednesday, against a flat FTSE 100 index.
Higher central bank rates have helped banks report bigger profits in recent quarters, as they make money on the widening gap between what they charge on lending and pay out on savings - leading some lawmakers to accuse banks of "profiteering".
"Support is growing for a windfall tax on these unearned profits: we’ve heard politicians from the backbenches throw their weight behind the idea, now we need those from within government to do the same," said Fran Boait, co-executive director of Positive Money, which campaigns for a fair financial system.
Lloyds CEO Charlie Nunn said that he recognised cost of living pressures were "proving challenging" for customers, but said the bank was proactively supporting customers and was offering higher savings rates.
The bank's net interest margin - a key measure of profitability - came in at 3.14% in the April-June quarter, slightly down on 3.22% in the first three months of the year.
The bank said it expected this to fall more slowly than previously forecast, dipping to 3.10% this year instead of 3.05%.
Nunn also told reporters he respected outgoing NatWest CEO Alison Rose as a "role model in financial services", after she stepped down with immediate effect on Wednesday following a spat with former Brexit party leader Nigel Farage over the closure of his account at NatWest-owned Coutts.
($1 = 0.7754 pounds)
Reporting by Iain Withers and Lawrence White; editing by Sinead Cruise and Jason Neely
Source: Reuters