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Friday, 2 August, 2002, 08:48 GMT 09:48 UK
Lloyds warns of tough outlook
Lloyds-TSB branch
Lloyds TSB has become the latest High Street bank to say it is suffering from turmoil on the world's financial markets.

The bank reported stable half-year profits, but said that trading conditions were set to remain difficult for the rest of the year.

The bank posted pre-tax profits of 1.604bn for the first half of 2002, up just 1m on the same period last year.

And it said it had increased its provisions for bad debt by nearly 50% to 479m.

This included 70m to cover loans its made to two US firms - believed to be Enron and WorldCom - and 75m to cover the financial crisis in Argentina.

On Thursday, High Street rival Barclays reported a 6% slide in half-year profits after it was forced to increase its bad debt provisions.

Cost cuts helping

Lloyds said the market "turmoil", fuelled by corporate accounting scandals, had taken its toll on the bank's operations.

"These issues have had a direct effect on the Group's results in the first half of the year, and are likely to continue to have an impact going forward until some stability returns to global stock markets," said Mr Ellwood.

He added that efficiency measures had helped maintain Lloyds' profits, and that "cost control remains critically important" at the bank.

In February, Lloyds said it was to cut 5,000 jobs after it reported an 8% fall in full-year profits.

But analysts noted that income growth at the bank was sluggish.

"They can't rely on costs cuts forever, income growth is the challenge for the company," said Mike Trippett, banking analyst at Bear Stearns.

Shares in Lloyds fell 15 pence to 571p in early trade on the London market.

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The BBC's Brian Milligan
"Lloyds has had to accept that much of its investment will never be recovered"
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