By Chris Dorrell
Lloyds first quarter profits rose 46 per cent as the bank became the latest UK lender to see its bottom line boosted by a hike in interest rates.
The lender’s pre-tax profits came in at £2.3bn compared to £1.5bn the same quarter last year.
The bank’s net interest margin – the difference between what it receives in interest payments and pays out to savers – widened to 3.2 per cent, helping net interest income swell 20 per cent to £3.5bn.
Charlie Nunn, chief executive of Lloyds Banking Group said: “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.”
However, he cautioned that “the macroeconomic outlook remains uncertain.”
Lloyds reported an impairment charge of £243m, up £37m on the same period last year but below consensus estimates. It confirmed that asset quality remains “resilient”.
In the aftermath of Silicon Valley Bank’s (SVB) collapse, deposits have been in focus. At Lloyds customer deposits were down £2.2bn in the quarter, with a larger £3.5bn reduction in current account balances. The bank said this was driven by “seasonal customers outflows” and “a more competitive market”.
Deposits in its commercial banking arm meanwhile increased by £2.7bn.
The results – the last of the UK’s major banks – came at a time of stress for the global banking sector. First Republic became the third bank felled in a little over a month and regional banks in the US faced a big sell-off yesterday.
But Lloyds said it had a “strong and stable” liquid asset portfolio and confirmed all of its assets hedged for interest rate risk.
Lloyds, HSBC profits and interest rates
HSBC was the first bank to report a hike in profits this week. It announced its quarterly dividend since the pandemic and a $2bn share buyback as the bank attempted to convince shareholders of the merits of its global business.
Shares immediately popped four per cent on the open in London.
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