Lloyds Banking Group H1 23 – 26/07
since cresting at one-year highs in February this year Lloyds share price has been trending lower, with the shares now down on the year, despite numbers that by and large have been broadly positive.
Since May and another positive update Lloyds shares have continued to slide back falling to 7-month lows over concerns that the improvement in margins could well grind to a halt. In Q1 statutory profit pre-tax profits came in at £2.26bn, a £716m increase on the same quarter last year, on net income of £4.65bn.
Net interest margin remained steady at 3.22% unchanged from Q4, and up from 2.68% in Q1 last year.
The bank set aside a further £243m in respect of impairments, a modest increase from the £177m set aside in Q4, but well below the £465m set aside in Q1 last year. Customer deposits fell slightly during the quarter from £475.3bn to £473.1bn and are down 2% from a year ago.
Operating costs did see a modest increase over the quarter to £2.17bn but are still lower than this time last year. When Lloyds set its guidance in in February the bank said it expects to see net annual interest margin to improve to greater than 3.05%, up from its previous estimate of 2.8%, while operating costs are set to remain static at £9.1bn, rising to £9.2bn in 2024. This guidance was kept unchanged despite expectations on further rate rises from the Bank of England.
This higher rate/margin outlook appears to be being tempered by an expectation that savers are more likely to start moving their money around to achieve higher returns in the higher inflation environment in order to create a stickier deposit base. Lloyds has already seen an £8bn fall in its deposit base over the last 12 months and will be keen to ensure this doesn't deteriorate any further.
Q1 also saw a slowdown in loans and advance to customers, which fell to £452.3bn, a number that has been trending lower since June of last year, although it is still above the levels of Q1 last year.
