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Lloyds Banking Group Q1 interim management statement

ended 03. May 2023

Lloyds Banking Group has just published its Q1 23 interim management statement. You can read the full statement >> here <<.  Lloyds says it took an impairment charge of £243 million, up from £177 million a year ago, and was seeing “modest” increases in borrowers falling into arrears and defaulting due to the cost-of-living crisis. However, it added that levels remain at or below those seen before the pandemic struck.

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John Choong
Senior Equity Research Analyst at Investing Reviews
Lloyds' Q1 update shows that the UK's economy and banking system is more resilient than its counterparts across the pond. Although impairments ticked up on an annualised basis, it's worth noting that the final amount came in sizeably lower than in Q4 (£465m), and what analysts had been projecting for (£356m). Meanwhile, net interest margins managed to remain robust. And despite the slight decline in customer deposits, Lloyds still posted better-than-expected profits, with basic EPS beating analysts' estimates. As a result, Lloyds blew expectations out of the water on its return on tangible equity (19.1%) - the highest figure it's reported since June 2021. All in all, this was a solid update from Lloyds, showing that it's still very much in the game despite the recent banking turmoil and losing out to higher interest rates being offered at money market funds. However, a more accurate depiction of the UK housing market and economy will be clearer in the coming quarters.
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Riz Malik
Independent Financial Adviser at R3 Wealth
The potential impact of higher interest rates and rising living costs could lead to increased arrears and defaults for lenders, including Lloyds, toward the latter part of 2023. Therefore, it is essential for lenders to continue to provide support to consumers through education, repayment programmes, debt counselling and financial assistance to avoid soaring impairment charges. The upcoming two quarters will offer a more accurate reflection of the UK economy's true state.
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Kevin Dunn
Mortgage and Protection Adviser at Furnley House
Though credit impairment charges are up, Lloyds reports that they still remain below the levels seen since before the pandemic. This is another indicator that house prices may well remain stable for a sustained period. We will see how robust the average UK household's finances are as more people come off their ultra-low fixed rates throughout 2023. That will be the real litmus test.