Lloyds Banking Group PLC (LSE:LLOY) profits were better than expected but analysts suggested the shares fell as guidance was not upgraded as some investors seemed to be anticipating.
Results for the quarter showed profit before tax and excluding remediation came to £2.2bn, which was 11% ahead of consensus, pointed out the analysts at UBS.
Net interest income was 1% below the average City forecast (despite the stinginess of its savings rates) and non-interest income 4% ahead, they added, which left total income in line with estimates.
Operating expenditure was 3% below predicted levels to help enable profit to beat forecasts, helped by lower remediation and lower impairments.
Net interest margin of 3.22% was stable from the previous quarter, which compared to the 3.21% expected by the market.
Looking at capital levels, CET1 was 14.1%, down from 15.1% at the end of December but in line with consensus as it included 21bps for dividend accrual, 18bps for the acquisition of vehicle management company Tusker and the £800mln full-year fixed pension fund payment.
Management reiterated all guidance given at the final results and no dividend or share buyback was proposed, as expected.
It was a “solid” set of results, said analysts at Jefferies, but for NIM “we saw scope for this to be lifted”.
A small deposit outflow during the period mirrored what was seen last week from NatWest, “but this is nothing to be concerned about in our view”, said analysts at Shore Capital.
For the full year, Shore Cap is forecasting a reported PBT of just over £7bn, with the current consensus at £7.16bn for earnings per share 7.2p.
“Following this update, we provisionally expect consensus and our forecasts to nudge up slightly on the back of the Q1 beat,” the Shore Cap analysts said.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “While an increase to costs takes a little shine off the bank’s performance, there is still a lot to be positive about.
“First Republic’s collapse has hit US banks’ shares, but looking longer term Lloyds could be among the beneficiaries in that some challenger banks don’t have the strength and depth to navigate through the current environment.
“This could create opportunities for Lloyds, which may see the bank retain some of its firepower, rather than going too hard on dividends and share buybacks.”