BANK of Scotland owner Lloyds Banking Group made a pre-tax profit of £3.3 billion in the first six months of the year – a sharp 14% decline from the £3.9bn reported this time last year although a better-than-expected performance predicted by some analysts.
The owner of Scottish Widows and Halifax, unveiling its results for the six months ending June 30, 2024, said that earnings fell as it generated less income despite borrowing costs remaining higher. Its net interest income, which is the amount it generates from loans minus what it pays out on savings, fell by one-tenth year on year.
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Lloyds, the UK’s largest mortgage lender, was among the UK retail banks that made record profits last year, boosted by higher interest rates which allowed banks to charge more for loans. This performance comes amid a broader slowdown in the market.
An upbeat Charlie Nunn, Lloyds Banking Group’s chief executive, said: “In the first six months of 2024, the group delivered robust financial results with solid income performance and cost discipline alongside strong capital generation.”
Noting that 2024 is “a key year for our strategic delivery”, he added: “We continue to deliver on our strategic transformation, as illustrated in the fourth of our investor seminars last month. We remain on track to meet our 2024 targeted outcomes. Indeed, our progress to date enables us to reaffirm 2024 guidance and remain confident in achieving our 2026 strategic objectives and guidance.”
Lloyds also revealed that its balance sheet grew, with the amount it lent to customers increasing by £2.7bn. Customer deposits also increased over the period, with an additional £4.9bn put into savings and current accounts.
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The bank noted that it “helped over 31,000 first-time buyers to purchase their first home, with over £7bn of lending” while customers have opened nearly two million new savings accounts. Its “robust financial performance”, it added, was in line with consensus.
Lloyds added: “We have helped over 53,000 small business and charities to bank with us for the first time, alongside the over one million businesses we support across the UK each day.”
Mr Munn pointed to the group’s “purpose-driven strategy”, explaining: “Delivering in line with our purpose of ‘Helping Britain Prosper’ ensures that we drive outcomes that benefit all stakeholders.
“We continue to provide support to our customers to help them meet their financial needs, including supporting their savings goals through our strong ISA propositions, attracting an additional £6bn of new Cash ISA savings during the first half of 2024.”
Looking to the full year outlook, Lloyds said it is “on course” to deliver cost-savings of about £1.2bn by the end of the year and meet its strategic target of unlocking about £700 million of additional revenues for 2024.
Dan Coatsworth, an investment analyst at AJ Bell, said the banking giant “may have just about squeaked ahead forecasts with its latest results, but a lack of upgrades following a strong run for the share price has put Lloyds on the back foot”.
He noted: “The market may also be focusing on a decline in key metrics – including net interest margin, which measures the difference between the amount a bank earns on lending versus what it pays out for deposits.
“Given rates have stayed higher for longer, there may have been some expectation that Lloyds would have done rather better on net interest margins. In a competitive market for mortgages and savings products the initial boost provided by the rate hiking cycle may have played out.”
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At Hargreaves Landsown, senior equity analyst Matt Britzman said that an improved economic outlook for the UK drove the better-than-expected profit performance, as impairments came in below expectations. He added: “Underneath the accountants’ mojo, borrowers continue to show resilience in the face of higher interest rates.
“Lloyds grew the loan book over the period, with a slight uptick in new mortgages. These still aren’t as profitable for the banks as they have been in the past, but it’s a good sign that demand’s coming back.”
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