Bank update

Lloyds profit falls 28% as customers remortgage

Bank of Scotland
Bank of Scotland is part of the Lloyds group (pic: Terry Murden)

Lloyds Banking Group posted a £1.63bn pre-tax profit for the first quarter, slightly ahead of analyst forecasts, but down 28% from £2.2bn last year as customers remortgaged. Profit was 8% lower quarter on quarter.

Net interest margin (NIM), which measures the difference between money it earns and lends, fell to 2.95% from 3.22% last year. This was also a smaller drop than City forecasts. 

The mortgage book saw churn because of higher levels of mortgage refinancing.

Chief executive Charlie Nunn said: “The group is continuing to deliver in line with expectations in the first quarter of 2024, with solid net income, cost discipline and strong asset quality. Our performance provides us with further confidence around our strategic ambitions and 2024 and 2026 guidance.”

Lloyds, which includes Bank of Scotland and Scottish Widows, said it took no further charges related to the potential impact of the motor finance by the Financial Conduct Authority.

The bank booked a £450m provision related to the possible costs of the redress scheme in February. 

Market reaction

Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: “Lloyds’ numbers have begun to slow, which was to be expected as interest rates appear to have peaked and competition in the mortgage market heats up. While the bank’s profits and net interest margin may have been squeezed, they are still at strong levels.

“More generally, Lloyds appears to be in relatively rude health and in a good position to manage the potential fall of interest rates later in the year.

“With such steady performance, Lloyds’ focus may soon turn to more strategic questions around its future direction, adding to the £6 billion sale of Scottish Widows’ in-force bulk annuity portfolio announced earlier this year.”

…more follows

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