Britain’s Lloyds Bank reports 28% slide in first quarter profit on income squeeze

Lloyds Banking Group reported a 28 per cent fall in first quarter pretax profit on Wednesday, in line with analyst expectations, as rising costs, peaking interest rates and intensifying competition in the mortgage market hurt income.

Britain’s largest mortgage lender reported first quarter pretax profit of £1.6 billion (€1.8 billion), down from £2.3 billion a year ago.

The bank said higher operating costs were partly to blame for the profit fall, including a new sector-wide Bank of England levy on lenders.

The results underscored the challenge Lloyds and peers will face to continue a recent run of rising profit, as the interest rate environment turns and expenses from a financial industry technology arms race tick higher.

Lloyds said its net interest margin, a closely-watched measure of profitability, edged down to 2.95 per cent from 2.98 per cent at the end of the fourth quarter and 3.22 per cent a year ago.

Britain's banks had enjoyed a sharp uplift in profit in recent years as policymakers hiked interest rates rapidly to combat inflation. Those moves helped banks make more on the gap between what they charge borrowers and what they pay depositors.

Lloyds took an impairment charge of just £57 million in the quarter, against a £280 million analyst forcast, underlining the resilience of its borrowers and robust asset quality across its loan book.

It also opted against making any fresh provision this quarter for possible redress claims in its motor finance business, after already setting aside £450 million. - Reuters

(c) Copyright Thomson Reuters 2024