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Summary
- Lloyds Banking Group shares rose nearly 5 per cent to a fresh 52-week high.
- The bank realised a profit after tax of £1,397 million in the January-March quarter.
- The group has indicated to resume progressive and sustainable dividend policy.
Shares of Lloyds Banking Group (LON: LLOY), the London-headquartered banking and financial major, rose nearly 5 per cent to a fresh 52-week high in the pre-afternoon deals on Wednesday, 28 April, after the banking giant upgraded the guidance for the financial year 2021.
The stocks of Lloyds Banking opened sharply higher in the morning session following the first quarter earnings release. It went on to hit a fresh 52-week high after partly paring morning gains.
According to the data available with the London Stock Exchange, the stock of Lloyds Banking Group advanced as much as 4.93 per cent to a 52-week peak of GBX 45.73 from a previous close of GBX 43.58 apiece. The stock has managed to breach the multi-month high of GBX 45.01, recognised on 13 April.
Lloyds Banking Group (28 April)
(Source: EODHD/Others, Thomson Reuters)
Q1 financials
Lloyds Banking realised a profit after tax of £1,397 million in the January-March quarter of FY21, nearly three times the profit of £480 million in the same period a year earlier. On a month-on-month basis, the net profit was 105 per cent higher than the Q4 FY20 profit of £680 million.
The sharp spike in the profit after tax of Lloyds Banking Group was largely driven by the release of provisions set aside to meet the expected credit loss (ECL) on the account of the coronavirus pandemic-led disruption in the credit cycle. Given the restated versions of economic outlook, the business momentum also supported the financials in the reporting quarter.
- The operational distress for the banking sector led by the low interest rate regime steered a drop in the net interest income for the bank on a year-on-year basis.
- Lloyds Banking earned a net interest income of £2,677 million in the Jan-Mar period of 2021, down 9.25 per cent from £2,950 witnessed in the first quarter of FY20.
- As a result of lower net interest income and slightly reduced income from other sources, the net income of the bank slipped by 7 per cent Y-o-Y to £3.7 billion.
- However, the net income stood 2 per cent higher on a sequential basis.
- The financial services major managed to bring down the net costs by 2 per cent to £1.9 billion in the reporting quarter, primarily led by the persistent cost control strategies and reduced remediation expenditure.
- Lloyds Banking’s asset quality remained resilient in the quarter with loans and advances soaring up by £3.3 billion to £443.5 billion, while customer deposits grew by £11.7 billion to £462.4 billion.
- The retail clientele emerged as a substantial contributor in driving up the customer deposits with retail accounts adding £5.6 billion in the quarter under review.
- The bank maintained a loan-to-deposit ratio of 96 per cent, indicating an adequately-positioned business with capacity to extend the credit to expedite the economic recovery.
Lloyds Banking Group has upgraded the guidance following the better-than-expected financial performance in the Q1 FY21 and the assumptions based on the present economic conditions. As per the fresh guidance provided, the bank is expecting to have a net interest margin in excess of 245 basis points, maintaining the risk-weighted assets in FY21. Notably, Lloyds Banking has indicated to resume progressive and sustainable ordinary dividend policy by accruing the dividends.
