SOME analysts believe long suffering investors in Lloyds Banking Group will have to wait even longer for dividends to resume.
That prediction came as Lloyds booked a further £900 million for payment protection insurance mis-selling redress and confirmed a five per cent drop in statutory pre-tax profits for the first nine months of the year at £1.61 billion, down from £1.69bn.
Shares in the bank, which also includes the Bank of Scotland and Halifax brands, fell 2.4 per cent, or 1.84p, to close the day at 73.5p.
The latest money set aside for PPI means the group has not taken £11.3bn in charges and it yesterday warned it may yet have to increase that total. Analysts at Citi suggested a further £1bn may need to be taken in 2015.
The volume of claims was said to have fallen year-on-year but had shown an increase in the most recent quarter. Lloyds finance director George Culmer said: "The good news is that in three weeks since the quarter end the claims are down, but that is only three weeks so I would be cautious."
Lloyds, which is run by chief executive Antonio Horta-Osorio, only recently narrowly passed a test by European regulators to see if banks have enough capital to weather another significant economic crash.
It faces further examination by the Bank of England in December to measure its resilience against a number of scenarios including a major fall in house prices and interest rates rising to six per cent.
Analysts expect the result of the BoE test will play a large part in whether Lloyds, still 25 per cent owned by the British government, will be able to pay its first dividend since being bailed out in 2008.
Ed Firth, from Macquarie, said: "Whilst we do not see failure as having capital raising implications, we no longer expect Lloyds to pay a 2014 dividend."
However Ian Gordon from Investec is still forecasting a "token" 1p dividend for the second half of this year.
Mr Culmer said he remained confident the bank would be clear to pay a "modest" dividend for 2014. He said: "I expect to pass the (Prudential Regulation Authority) stress test and that very much remains the case."
Mr Horta-Osorio said: "As the business is performing strongly and the balance sheet has continued to strengthen, we are in ongoing discussions with the PRA regarding the resumption of dividend payments."
On a quarterly basis underlying profit in the three months to September 30 improved 41 per cent from £1.5bn to £2.16bn while on a pre-tax statutory basis the prior year's loss of £440m was turned around into a £751m profit.
Total income grew two per cent to more than £4.6bn while costs were down by two per cent to £2.23bn and impairments tumbled 61 per cent from £670m to £259m.
Across the first nine months of the year the underlying profit has risen 35 per cent to £5.97bn, from £4.4bn in spite of income declining one per cent to just short of £14bn.
Impairments in the nine month period were noted at £1bn, compared to £2.48bn as Lloyds continued to benefit from benign economic conditions and continuing low interest rates.
Mr Horta-Osorio believes a new strategic plan for the next three years, which will see 9,000 jobs cut and 150 branches close, will help to deliver sustainable growth. Part of the strategy involves a £1bn investment in digital products and services. He said the UK economy is "growing robustly" and believes interest rates will begin rising next year and settle at around three per cent in 2018.
However Mr Horta-Osorio said: "The economy is still fragile and risks remain, particularly geopolitical and the eurozone."
Lloyds spun off the TSB brand earlier this year through a stock market flotation and has since reduced its stake to 50 per cent of the challenger bank.
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