Lloyds Banking Group PLC (LON:LLOY) saw its shares jump higher this morning as its first-quarter results beat market expectations, despite further provisions for conduct issues, with the part-state-owned lender reaffirming its full-year guidance.
For the three months to March 31, the group’s statutory pre-tax profit jumped to £1.304bn, up from £654mln a year earlier and £973mln in the final quarter of 2016, even after a further batch of provisions for payment protection insurance mis-selling and other conduct issues totalling £550mln.
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UBS had expected the bank’s pre-tax profits to hit £1.21bn helped by the absence of last year’s £790mln cost of buying back high income bonds.
The FTSE 100-listed firm saw its underlying profit increase to £2.083bn, up 1% on the £2.054bn reported a year earlier, and 16% on the £1.794bn posted for the final quarter of 2016.
Net interest margin rises to 2.8%
Lloyds’ net interest income was fairly steady at £2.928bn, up 1% from the £2.906bn seen a year earlier, with its banking net interest margin up to 2.80% from 2.74%.
The lender’s tangible net assets per share increased to 56.5p driven by the strong underlying profit growth.
António Horta-Osório, Lloyds’ group chief executive, said: “We continue to make good progress against our strategic priorities of creating the best customer experience; becoming simpler and more efficient; and delivering sustainable growth; and we remain on track to deliver the Group financial targets for 2017, whilst maintaining our longer term guidance.”
He added: “As announced earlier this month, we are determined that the victims of HBOS Reading are fairly, swiftly and appropriately compensated and we have set aside a provision of £100mln in our first quarter results.”
READ: Lloyds sets aside £100mln to compensate HBOS fraud victims
In early afternoon trading, Lloyds’ shares were off earlier highs but still 2.5%, or 1.65p higher at 69.06p.
In a note to clients, Shore Capital analyst Gary Greenwood said: “Lloyds Q1 results have come in slightly ahead of our own and company-collated consensus expectations.
“More importAntly, full year guidance for net interest margin and the impairment ratio has been upgraded and management is now indicating that it expects capital generation to be at the top end of its 170-200bps target range.”
The analyst reiterated a ‘buy’ rating and a fair value estimate of 75p on Lloyds shares, offering 12% upside potential.
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