Bank of Scotland owner Lloyds Banking Group has hailed surging pre-tax profits of £2.3 billion since January, up from £1.5bn against the same time last year.
It joined rivals in posting better-than-expected results for the first quarter as rising interest rates helped profits jump 46 per cent higher.
However, the favourable figures for the lending group for the three months to March 31 appeared to do little to quell unease among investors in a difficult spring for global banking.
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After the biggest US banking collapse since 2008 with the failure of Silicon Valley Bank and Signature Bank followed by the guided rescue of First Republic in the US, as well as the collapse of Switzerland’s Credit Suisse, banking share values have been impacted.
Shares in leading UK banks including NatWest Group, the owner of Royal Bank of Scotland, Lloyds, Barclays, Virgin Money, formerly Clydesdale Bank, and HSBC all saw their shares decrease in value when SVB went down.
As Wall Street giant JP Morgan Chase took over First Republic, values remain unsteady.
Shares in Lloyds were down 4% in afternoon trading at 45.6p. At the same time NatWest shares were down 1.28%, Barclays down 1.82% and Virgin at 0.23% up.
Michael Hewson, chief market analyst at CMC Markets, pointed to a “difficult quarter share price-wise” for Lloyds, where it pushed up to one-year highs in early February, before sliding to its lowest levels since November last year as the March turmoil in the banking sector “clobbered” valuations.
“The bank has been a serial underperformer over the past five years despite being more profitable than it was when it was trading above 70p back in 2019,” he said.
For Lloyds, as one of the UK’s biggest mortgage lenders, further rate rises could prompt the risk of further impairments as well as potentially fuelling credit conditions concerns, as fixed rate mortgages start to roll off.
Mr Hewson said: “Here, we have continued to see a slowdown in loans and advance to customers, which fell to £452.3 billion, a number that has been trending lower since June of last year, although it is still above the levels of quarter one last year.”
Lloyds took an impairment charge of £243 million for the quarter, up from £177m a year ago.
Trading today, however, was expected to be lighter amid US Federal Reserve interest rate change expectations, said Susannah Streeter, who is head of money and markets at Hargreaves Lansdown, and there is also positivity.
“With Lloyds Bank beating profit expectations for the first quarter, it will allay concerns that ominous creaks in US regional banks will spill over into problems across the pond,” she said.
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