Lloyds profits jump by 46% amid higher interest rate charges
Profits at Lloyds Banking Group have jumped 46% amid higher interest charges for borrowers but the lender expects margins to drop over the rest of this year on the back of tougher competition for mortgage and savings customers.
Like most of Britain’s big high street lenders, the group reported better-than-expected profits for the first three months of the year, suggesting the UK sector has broadly shrugged off the financial turmoil that has so far caused three American banks, as well as Credit Suisse, to collapse since early March.
Lloyds, which owns Halifax and is the UK’s largest mortgage lender, reported a 46% jump in pre-tax profit to £2.3bn for the first three months of the year, up from £1.5bn a year earlier and better than the £2bn forecast by analysts.
The group benefited from higher interest rates, which haveclimbed to 4.25% in the UK over the past year. Lloyds subsequently reported a 20% rise in net interest income, which accounts for the difference between what is charged for loans and mortgages and what is paid out for savers, to £3.5bn.
The Bank of England is expected to raise interest rates further to 4.5% next week. However, Lloyds stopped short of upgrading its guidance, saying the impact of a higher base rate would be offset by increased competition, as rivals try to lure customers with better offers.
Its chief financial officer, William Chalmers, said that effect applied “both on the asset side, particularly in mortgages, and also on the liability side and savings”. While he said Lloyds had passed on the benefits of the base rate changes, mortgage margins were “as low as they’ve been for a while”.
Lloyds said it had suffered a £2.2bn drop in deposits to £473bn since December. This was partly because of tax
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