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Highlights
- Banking major Lloyds Banking Group’s Q3 2021 statutory profit before tax jumped by 96 per cent to £2.0 billion, while its underlying profit rose by 88 per cent to £2.2 billion
- The improved Q3 2021 performance was attributed to a lower loan default probability driven by a boom in the mortgage market and UK’s improving macroeconomic scenario.
British banking giant Lloyds Banking Group PLC (LON:LLOY) shares rose over 1.4 per cent after the group reported strong profits growth in its Q3 2021 interim management statement, released on Thursday.
Lloyds Banking Group PLC (LON: LLOY) share price performance
Lloyds’ shares were trading at GBX 49.66, up by 1.42 per cent on 28 October at 09: 47 AM BST. Meanwhile, the FTSE 100 index, which it is a part of, was trading at 7,230.85, down by 0.31 per cent.
(Image source: Refinitiv)
The group’s market cap stands at £34,759.46 million, and its one-year return is at 74.86 per cent as of 28 October.
Lloyds Banking Group’s financials for the 9 months ended 30 September 2021
The group’s statutory profit before tax for the 9 months ended 30 September 2021 rose to £5.9 billion, up from £434 million in the same period of 2020.
For Q3 2021, statutory profit before tax jumped by 96 per cent to £2.0 billion, up from £1.036 billion in Q3 2020. The group’s Q3 2021 underlying profit also increased by 88 per cent to £2.2 billion, up from £1.162 billion in Q3 2020.
The boost in profits in Q3 was due to a lower likelihood of loan defaults supported by higher demand for larger homes in the mortgage market and as the UK is witnessing some economic recovery.
The group’s net income for the 9 months period jumped by 8 per cent to £11.6 billion, up from £10.81 billion of the same period last year. The boost was due to an increase in its average interest-earning assets of £443.0 billion.
Improved FY 2021 outlook
The group also upped its full-year guidance for FY 2021 due to its improved financial performance. Lloyds now estimates its net interest margin to be a little over 250 basis points, while its FY 2021 operating costs are now expected to be at about £7.6 billion.
Moreover, the group anticipates having a net credit impairment in FY 2021 and estimates its return on tangible equity to be above 10 per cent (not including about 2.5 percentage point benefit from changes in taxation rates)
The group’s new CEO, Charlie Nunn, is expected to unveil the bank’s new strategy spanning over a multi-year period in 2022.
Bottom Line
UK banking companies have recently been releasing solid results backed by economic recovery and a lending boom.
Earlier this month, banking majors Barclays (LON: BARC) and HSBC (LON: HSBA) had posted strong Q3 profits, beating analyst expectations.
Barclays’ Q3 2021 pre-tax profit rose by almost 2x, reaching £2 billion, beating a consensus of £1.6 billion. Whereas HSBC’s Q3 2021 profits rose by 76 per cent to US$ 5.4 billion, surpassing a forecast of US$ 3.8 billion.
