Lloyds Banking Group PLC (LSE:LLOY) beat City expectations with a 46% increase in first-quarter profit as net income jumped, continuing to benefit from the higher interest environment.
The high street lender said net income climbed 15% to £4.7bn in the three months to 31 March 2023 from £4.03bn a year prior, while statutory pre-tax profit improved to £2.26bn from £1.54bn. Analysts had forecast profit of £1.95bn.
Underlying net interest income rose 20% to £3.54bn, primarily driven by a stronger banking net interest margin of 3.22% in the quarter, unchanged from the fourth quarter but 54 basis points (bps) higher than the first quarter of 2022.
Other income of £1.3bn was 6% higher year-on-year, while operating costs increased 5% to of £2.2bn, reflecting higher planned strategic investment, cost of new businesses and inflationary effects.
Charlie Nunn, group chief executive, 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.”
The FTSE 100-listed bank said asset quality remains resilient with an underlying impairment charge of £0.2bn and asset quality ratio of 22bps continuing to reflect robust observed credit trends.
Loans and advances to customers fell £2.6bn to £452.3bn while customer deposits of £473.1bn were down £2.2bn, including a reduction in Retail current account balances of £3.5bn, partly driven by seasonal customer outflows, including tax payments, higher spend and a more competitive market.
This was partly offset by Commercial Banking deposit increases of £2.7bn.
The bank’s CET1 ratio of 14.1% remained ahead of the ongoing target of 12.5%.
Looking ahead, Lloyds continues to expect banking net interest margin to be greater than 305bps; operating costs to be c.£9.1bn; asset quality ratio to be c.30bps; the return on tangible equity to be c.13% and capital generation to be c.175bps.