Lloyds Banking Group PLC (LSE:LLOY) produced a better-than-expected set of results for the second quarter, with profits, earnings and the dividend all coming in ahead of forecasts.
Pre-tax profit rose 17% year on year to just under £2 billion, topping expectations by 18%. This was thanks mainly to lower costs and a smaller-than-expected charge for bad loans, helped by some positive adjustments as the economic outlook improved.
Earnings per share were up 24%, and the interim dividend rose 15% to 1.22p, both ahead of what the City had been looking for.
Return on equity, a key measure of profitability, was also a healthy 15.5%. On the balance sheet, the group’s core capital buffer edged up to 13.8%.
Despite these numbers, Lloyds left its guidance for the rest of the year unchanged.
The bank still expects net interest income of around £13.5 billion and costs of about £9.7 billion. Management is aiming for a return on equity of 13.5%, higher than the City’s consensus, though some analysts are more cautious as they factor in potential future charges.
One cloud on the horizon remains the Supreme Court’s looming decision on motor finance commission redress. Lloyds has set aside over £1.1 billion for potential costs, but no further provision was made this quarter.
With the shares already up 42% so far this year and now trading at a premium to book value, Shore Capital is keeping its ‘hold’ rating in place, seeing limited upside until there’s more clarity on the legal front and future guidance.
KBW remains upbeat on the outlook for UK banks, including Lloyds, seeing room for the positive run to continue even if shares aren’t a bargain by historical standards.
Its analysts say Lloyds should benefit from its structural hedge, a technical buffer that supports earnings, even as interest rates ease.
Lloyds remains the top-performing large UK bank in 2025, but the big question is what happens next after the court’s verdict.
KBW is a buyer up to 90p. The shares were up 1.4% at 78.71p.