29th Apr 2026 10:04
(Alliance News) - Lloyds Banking Group PLC on Wednesday nudged up full-year net interest income guidance as it reported better-than-expected first quarter profit.
The Edinburgh-based financial services company said pretax profit rose 33% to GBP2.03 billion in the first quarter from GBP1.52 billion a year prior, as net income increased 9.1% to GBP4.79 billion from GBP4.39 billion.
Profit growth reflected "higher total income, controlled costs and benign impairments", the FTSE 100 listing said.
Underlying profit increased 31% to GBP2.01 billion from GBP1.53 billion, ahead of company compiled consensus of GBP1.89 billion.
Underlying net interest income climbed 8.5% to GBP3.57 billion from GBP3.29 billion, in line with consensus, supported by a higher banking net interest margin of 3.17%, up from 3.03% a year earlier.
Lloyds said income from its structural hedge, which banks use to shield against interest rate volatility, is now expected to exceed GBP7 billion in 2026 compared to guidance of around that figure before.
The bank does not expect a rate cut in the UK this year and pencils in one quarter point reduction by the end of 2027.
"Increases in energy prices lead to the re-emergence of inflationary pressures, with reductions in UK Bank Rate expected to be delayed until 2027," the bank explained.
Operating costs declined 3.1% to GBP2.47 billion from GBP2.55 billion with the cost to income ratio improving to 51.9% from 58.1% a year ago.
Earnings per share jumped 41% to 2.4 pence from 1.7p.
"The group delivered broad based growth across the Retail business, led by UK mortgages and the European retail business, alongside growth in Commercial Banking within Corporate and Institutional Banking, partially offset by continued repayments of government-backed lending within Business and Commercial Banking," the lender said.
Underlying impairment charge fell to GBP295 million from GBP309 million, better than GBP380 million consensus, with the asset quality ratio at 25 basis points.
The charge was slightly lower than prior year despite a higher charge of GBP101 million from updated multiple economic scenarios.
The MES charge reflects a GBP151 million impact from the deterioration in economic outlook as a result of the Middle East conflict, partly offset by the release of the GBP50 million put aside for global tariff and political disruption risks now considered to be adequately captured.
Lloyds confirmed there has been no change to its motor finance provision.
Return on tangible equity improved to 17.0% from 12.6%, while the CET1 capital ratio stood at 13.4% compared to 13.5% a year ago.
"In the first quarter of 2026, the group delivered sustained strength in financial performance, growing our income, maintaining our cost discipline and delivering strong profitability," said Chief Executive Charlie Nunn.
"We are confident in our delivery for the year ahead," he added.
Loans and advances to customers rise to GBP486.2 billion, with growth across retail and commercial banking, while customer deposits edge slightly lower to GBP495.9 billion.
While most guidance was maintained, Lloyds upgraded its outlook for underlying net interest income, now expecting it to exceed GBP14.9 billion in 2026 compared to around that figure before.
The bank continues to expect return on tangible equity of more than 16%, a cost:income ratio below 50%, and an asset quality ratio of around 25 basis points for 2026.
CEO Nunn confirmed Lloyds will be presenting a new strategy alongside the half-year results.
Shares in Lloyds Banking Group were down 0.9% at 97.72p each in London on Wednesday, with the FTSE 0.6% lower.
By Jeremy Cutler, Alliance News reporter
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