Updated, 5:57 a.m. | LONDON – The Lloyds Banking Group said on Thursday that second-quarter profit more than doubled, as the partly nationalized British bank took another step toward privatization.
Lloyds, which received a multibillion-pound bailout during the financial crisis, said profit in the three months ended June 30 rose to £1.4 billion ($2.1 billion) from £547 million in the period a year earlier, while revenue increased slightly, to £4.8 billion.
The bank has been shedding assets and reducing its balance sheet in a bid to increase profitability before the start of the government’s potential sale of its stake in the bank.
George Osborne, Britain’s chancellor of the Exchequer, said in June that the government was “actively considering options for share sales in Lloyds,” and has appointed JPMorgan Chase to advise on potential sales for Lloyds and Royal Bank of Scotland, which also received a bailout.
The British government has said the break-even point on selling its 39 percent holding in Lloyds was around 61 pence, and the company’s stock is currently trading at 68.5 pence. The bank’s share price has risen 123 percent in the last 12 months.
“The share price is now in a position where the government can return the bank to the public at a profit,” the bank’s chief executive, António Horta-Osório, told reporters on Thursday. “We have completed the first phase of recovery, and now it’s the government’s decision.”
Mr. Horta-Osório declined to say when a potential share sale would take place. Shares in Lloyds rose 7.4 percent, to 73.5 pence, in morning trading in London on Thursday.
In a sign that Lloyds is starting to woo potential investors, the bank said it would enter into discussions with local regulators about restarting dividend payments to shareholders in the second half of the year. It has not paid a dividend since its botched 2008 takeover of a local rival, HBOS.
As spokesman for United Kingdom Financial Investments, the organization that manages the Lloyds holding on behalf of the British government, declined to comment, though analysts said the potential share sale, which will probably involve a series of offerings, could start by the end of the year.
Government officials and bank executives are said to be testing investor interest, though they have yet to confirm the timing of any offering, according to a person with knowledge of the matter, who declined to comment because he was not authorized to speak publicly.
In the short term, Lloyds may face competition for investors’ attention from the British bank Barclays, which announced on Tuesday that it would raise £5.8 billion through a rights issue of stock in September to bolster its capital reserves
As part of its re-emergence as a profitable bank, Lloyds has continued to shed assets, while loss provisions tied to delinquent loans fell almost 50 percent, to £811 million, in the second quarter.
The firm said so-called noncore assets had fallen 16 percent, to £82.6 billion, over the last six months, and were expected to drop to around £70 billion by the end of the year.
The improvements helped to support the bank’s first-half earnings, as it reported net income of £1.58 billion, a big turnaround from a £662 million loss in the period a year earlier. The first-half profit comes after three consecutive years of annual losses.
Analysts at Citigroup said Lloyds had benefited from a decline in delinquent loans, while profit from lending activities also was surprisingly strong in the second quarter.
“We see these as excellent results,” the analysts told investors in a research note on Thursday.
Despite its improved financial performance, Lloyds is still confronting a number of past wrongdoings that have cost the firm billions of dollars in legal costs.
On Thursday, the bank said it had set aside an additional £450 million to repay customers who had been inappropriately sold insurance products. The firm also said it had made an additional provision of £50 million related to delays in how a company it hired to handle customer claims had processed complaints.
All told, Lloyds has now set aside more than £7 billion to cover legal costs related to the inappropriate sale of insurance products to clients.
The bank also said its core Tier 1 ratio, a measure of the firm’s ability to weather financial shocks, now stood at 9.6 percent, and would rise above 10 percent by the end of the year.