Lloyds Banking Group, the UK’s largest mortgage lender, has faced a 28% decline in its quarterly pre-tax profit, reaching £1.6 billion for the first three months of the year. This represents a significant drop from the £2.3 billion reported during the same period last year. Analysts had anticipated a profit of £1.7 billion. The primary factor contributing to this decline is reduced net interest income, which reflects the difference between what Lloyds earns from loans and pays out for deposits. This income decreased by 10%, amounting to £3.2 billion, due to lower mortgage costs and increased savings account returns. Total lending by Lloyds, which also encompasses Halifax and Bank of Scotland, fell by £1.2 billion during the quarter. This decline is attributed to decreased mortgage lending, as more homeowners opted to refinance their loans earlier in the year amid greater economic uncertainty at the end of 2023. With the intensifying competition among UK lenders offering attractive deals during a period of historically high interest rates, Lloyds has nevertheless witnessed a surge in mortgage applications since the end of the quarter, which is projected to boost lending throughout the year. Lloyds’ Chief Financial Officer, William Chalmers, highlighted that approximately half of the group’s customers with fixed-rate mortgages have refinanced since October 2022, representing around £100 billion in lending. A substantial number of borrowers, with loans totaling approximately £50 billion, are anticipated to refinance over the course of the year. Meanwhile, total deposits declined by £2.2 billion during the quarter, indicating increased cash withdrawals by business customers. Mr. Chalmers expressed optimism regarding the economic outlook, stating, “We have seen an improved outlook for the economy – we think it will get better over the course of 2024 versus what we saw at the year end.” He emphasized, “Not massively so,” but added, “Overall I think that is positive from a customer activity point of view.” Credit card spending has increased by approximately 7% year-over-year, reflecting consumer resilience, according to Mr. Chalmers. Lloyds has revised its economic projections, now anticipating a 1.5% rise in average UK house prices this year, compared to a previously forecast 2.2% drop. The bank also anticipates three interest rate cuts this year, with the initial 0.25 percentage point reduction expected in May or June. Charlie Nunn, the group’s Chief Executive, stated that the quarterly results “provide us with further confidence around our strategic ambitions and 2024 to 2026 guidance” and that the bank is “continuing to support customers.”
Lloyds Banking Group Reports 28% Profit Decline Amidst Market Challenges
