A woman walks past a row of cash machines outside a branch of Lloyds Bank in Manchester
By Emma Rumney and Lawrence White
LONDON (Reuters) - Britain's Lloyds Banking Group said it would not cancel its preference shares following investor complaints about the possibility after insurer Aviva abandoned its plans to scrap the high-yielding shares.
George Culmer, the bank's chief financial officer, provided the reassurance on Wednesday as Lloyds reported first-quarter profits that just missed analysts' expectations.
"Absolutely no discussion on these and absolutely no plans to cancel these irredeemable preference shares through a reduction in capital," Culmer told a media call.
Aviva sparked fears among investors and drew the attention of regulators when it said last month it was considering cancelling the securities, sending preference shares in financial firms plunging.
Lloyds reported pre-tax profit of 1.6 billion pounds ($2.2 billion) in the first quarter, just missing analyst expectations of 1.82 billion pounds.
While falling short of the average of analysts forecasts based on Thomson Reuters data, the bank's profits grew by 23 percent compared with the 1.3 billion pounds it posted in the same period last year.
"Lloyds has made a good start to 2018," said Laith Khalaf, senior analyst at Hargreaves Lansdown, adding that the bank is benefiting from rising interest rates and its 2016 acquisition of credit card firm MBNA from Bank of America.
But he added while the bank has rebuilt profits and delivered steady returns to investors, share price gains had been more elusive.
The bank's shares were down 0.6 percent at 0715 GMT.
Finance director Culmer said the bank is into a second round of bidding for the around 109 billion pound asset management mandate that it withdrew from Standard Life Aberdeen (SLA) in February.
The 11 billion pound merger that created SLA triggered the right for Lloyds and Scottish Widows, which is part of the British bank, to review an agreement struck in 2014 for Aberdeen to manage pension assets on behalf of Lloyds’ insurance and wealth units as Standard Life is a "material competitor" to both.
"We’ve entered round two now with a more select group of bidders, and what I can say is obviously we’ve not allowed into round two any bidder with whom we have material competition concerns," Culmer said on Wednesday.
Chief Executive Antonio Horta-Osorio said the bank's first quarter results demonstrated the strength of its business model, and maintained his upbeat tone on the UK economy.
"The UK economy continues to be resilient, benefiting from low unemployment and continued GDP growth," he said, adding the bank had seen no deterioration in asset quality and expected this to continue throughout 2018.
Lloyds' exposure to consumers' finances via mortgages and unsecured lending like credit cards make it a bellwether for the British economy.
While loan impairments rose to 258 million pounds over the first three months of 2018, compared with the 127 million pounds seen in the same period last year, Culmer stressed this was "nothing to do" with a deterioration in the bank's loan book or the economy.
The bank, which laid out a fresh three-year strategy in February, also reported a common equity tier one capital ratio of 14.4 percent and took another 90 million pounds in provisions to resolve issues related to its mis-selling of payment protection insurance.
($1 = 0.7161 pounds)
(Reporting by Emma Rumney and Lawrence White, editing by Sinead Cruise)