The UK’s premier financial institution, Lloyds Banking Group PLC (LSE: LLOY), has confirmed its 2023 outlook, notably for the UK margin, after revealing profit figures that surpassed anticipations and a decline in bad debts.
CEO Charlie Nunn stated, “Our group maintains a steady momentum. The first three quarters showcased solid financial results, underpinned by growth in net income, fiscal prudence, and stable asset quality. This trajectory encourages us to stand by our projections for 2023.”
The prominent high street bank disclosed a pre-tax profit for Q3 that surged to £1.89 billion, a significant leap from £576 million the previous year and surpassing the predicted £1.77 billion.
Net earnings saw a slight increase of 1%, reaching £4.51 billion from the former £4.48 billion, with net interest revenue also seeing a 1% rise to £3.44 billion from £3.39 billion.
The net interest margin was recorded at 3.08%, a decline of 6 basis points from the prior quarter, mainly due to anticipated mortgage and deposit pricing challenges. However, Lloyds stands by its annual projection for a banking net interest margin exceeding 310 basis points.
This update from Lloyds follows a day after Barclays, a competitor, revised its margin outlook downward for the UK, citing intensified deposit competition.
Lloyds has retained its annual operational expense prediction at £9.1 billion. The only adjustment in projections is a minor enhancement in asset quality, now foreseen to be under 30 basis points.
Operational expenses for Q3 experienced a 4% increment, amounting to £2.24 billion, up from £2.15 billion.
Key indicators like a robust return on tangible equity were at 16.9%, and a CET1 ratio of 14.6% continues to surpass the set target of approximately 12.5%, along with a management buffer of around 1%.
While loans to clientele reduced by 1% to £452.1 billion, client deposits saw a 3% drop to £470.3 billion. However, charges for bad debts plummeted to £187 million, down from £668 million.
The banking sector shares had a tough day following Barclays’ results, so it remains to be seen how the market reacts to this announcement from Lloyds.
