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Highlights
- Lloyds Banking Group Plc has warned of uncertainty looming over the UK economy due to soaring inflation.
- The lending giant on Wednesday reported a 14% drop in statutory profit after tax to £1,204 million in Q1 2022, from £1,397 million in Q1 2021.
- Underlying profit before impairment increased by 26% to £1,962 million, from £1,554 million in Q1 2021, driven by strong net income growth.
UK-based leading retail and commercial financial services provider Lloyds Banking Group Plc (LON: LLOY) has been in the spotlight after the bank announced better-than-expected first-quarter profits on Wednesday, with strong income growth and capital build. However, it has warned of uncertainty looming over the UK economy due to soaring inflation.
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Q1 Report
The lending giant on Wednesday reported a 14% drop in statutory profit after tax to £1,204 million in Q1 2022, which was around £1,397 million in Q1 2021, indicating a higher net of insurance claims, total income, and an impairment charge for the period. The continued recovery in customer activity and increase in interest rate-driven strong revenue growth.
The net income rose by 12% to £4,112 million, from £3,664 million in Q1 2021, driven by higher net interest income benefited from increased average interest-earning banking assets and deposit growth and other income, alongside low operating lease depreciation. The bank’s net interest margin rose to 2.68%, from 2.49% in Q1 2021.
Underlying profit before impairment increased by 26% to £1,962 million, from £1,554 million in Q1 2021, driven by strong net income growth. Underlying impairment stood at £0.2 billion, as the lender warned that the rising inflation could affect the disposable income of borrowers.
Loan and advances to customers increased by 2% to £451.8 billion, from £443.5 billion in Q1 2021. Consumer deposits also rose by 4% to £481.1 billion, from £462.4 billion in Q1 2021, with continued inflows to the group’s trusted brands.
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Outlook
The UK-based financial service group has enhanced its guidance for FY2022 for banking net interest margin and return on tangible equity. Operating costs are expected to stand at £8.8 billion on the new reporting basis, with banking net interest margin expected to be above 270 basis points and asset quality ratio to be around 20 basis points.
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Risk-weighted assets at the end of 2022 are expected to be around £210 billion and the return on tangible equity is now expected to be greater than 11%.
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Share price performance
Lloyds Banking Group Plc (LON: LLOY) is listed on the London Stock Exchange since 24 November 2003. The bank, which is a constituent of the FTSE 100 Index, has not been performing well lately, with its returns on a one-year basis and year-to-date basis being positive as of 26 April 2022, standing at 9.71% and -1.56%, respectively.
The market cap of the company stands at £32.026.79 million as of 27 April 2022. Shares in Lloyds Banking Group Plc were up by 2.51% at around 9:30 AM (GMT +1) on 27 April 2022, at GBX 47.08.
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
