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Highlights
Profit Surplus: Adjusted pre-tax profit surpassed expectations by 11%, aided by a lower-than-forecast impairment charge.
Strong Net Interest Margin: The net interest margin (NIM) for the third quarter was reported at 295 basis points, slightly above forecasts, supported by structural hedge earnings.
Robust Capital Position: The phased-in Common Equity Tier 1 (CET1) ratio stands at 14.3%, comfortably exceeding the bank's target.
Lloyds (LSE:LLOY) reported adjusted pre-tax profit of £1.8 billion, a slight decrease from the previous year but 4% above consensus figures on an adjusted pre-provision profit basis. The bank's NIM remained strong, driven by effective structural hedging that mitigated the impact of deposit churn and narrowing mortgage margins.
Average interest-earning assets experienced a modest increase, although slightly below market expectations. The capital position remains solid, with the CET1 ratio significantly exceeding the 13.5% target. Analysts noted a positive outlook regarding the implications of Basel 3.1, which is set to take effect in 2026.
The tangible book value per share rose by 6% quarter-on-quarter, reflecting the bank's effective capital management strategies. Net interest income grew by 2%, bolstered by the structural hedge contributing positively to the margin. Additionally, other income exceeded forecasts by 3%, with a year-on-year increase of 10% primarily driven by retail and equity investment activities.
On the cost front, adjusted expenses were largely in line with market expectations, with remediation charges coming in significantly lower than anticipated. Impairment charges for the quarter were also below consensus estimates, contributing to a favorable cost of risk outcome.
Lloyds’ management has reiterated their guidance for the year, expressing confidence in achieving financial objectives for both 2024 and 2026. Analysts from RBC Capital Markets suggested that while the bank's performance is commendable, relative valuations to peers may indicate a challenging re-rating environment moving forward.
