Pre-tax profit and net income increased significantly
The Lloyds Banking Group has announced a strong first quarter performance, with pre-tax profit hitting £2.26 billion, up 46.4% from £1.54 billion recorded in the same period last year.
Lloyds, the UK’s biggest mortgage lender, also had its net income jump by 15% to £4.65 billion in the first three months of the year, as consecutive rate increases by the Bank of England has allowed banks to take in more money, lending at more profitable rates.
The banking group made a £243 million provision to cover potential losses, up from the £177 million it set aside in the same period a year ago.
“The group has delivered a solid financial performance in the first quarter of 2023, with strong net income and capital generation, alongside resilient observed asset quality,” Charlie Nunn (pictured), chief executive at the Lloyds Banking Group, commented on the bank’s Q1 2023 financial results.
“The macroeconomic outlook remains uncertain. We know that this is challenging for many people. Our purpose driven strategy, alongside our financial strength, means we can continue to support our customers across the country, helping Britain prosper.”
We’ve published our 2023 Q1 #LBGResults, showing a solid financial performance, with strong income growth and capital generation.
— Lloyds Banking Group (@LBGplc) May 3, 2023
For a full breakdown visit: https://t.co/YYeKOTJXfA
#LLOY $LYG pic.twitter.com/GRLZjkDTJv
Nunn added that they were also making good progress on the plans to transform the group.
“Our experience over the last year reinforces our belief that continued strategic delivery will create a more sustainable business and deliver increased returns for our shareholders in the medium to longer-term,” he stated.
John Choong, equity research analyst at InvestingReviews.co.uk, meanwhile, said that Lloyds’ Q1 update showed that the UK economy and banking system was more resilient than its counterparts across the pond.
“Although impairments ticked up on an annualised basis, it’s worth noting that the final amount came in sizeably lower than in Q4, and what analysts had been projecting for,” Choong remarked. “Meanwhile, net interest margins managed to remain robust. And despite the slight decline in customer deposits, Lloyds still posted better-than-expected profits, with basic EPS beating analysts’ estimates.
“As a result, Lloyds blew expectations out of the water on its return on tangible equity – the highest figure it’s reported since June 2021. All in all, this was a solid update from Lloyds, showing that it’s still very much in the game despite the recent banking turmoil and losing out to higher interest rates being offered at money market funds. However, a more accurate depiction of the UK housing market and economy will be clearer in the coming quarters.”
Kevin Dunn, mortgage and protection adviser at Leicester-based financial planner and mortgage broker Furnley House, noted that while credit impairment charges were up, Lloyds reported that they remained below the levels seen since before the pandemic.
“This is another indicator that house prices may well remain stable for a sustained period,” Dunn said. “We will see how robust the average UK household’s finances are as more people come off their ultra-low fixed rates throughout 2023. That will be the real litmus test."
Riz Malik, director of Southend-on-Sea-based independent mortgage broker R3 Mortgages, believes that the upcoming two quarters will offer a more accurate reflection of the UK economy’s true state.
“The potential impact of higher interest rates and rising living costs could lead to increased arrears and defaults for lenders, including Lloyds, toward the latter part of 2023,” he said. “Therefore, it is essential for lenders to continue to provide support to consumers through education, repayment programmes, debt counselling and financial assistance to avoid soaring impairment charges.”
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