- Lloyds Q3 profit surpasses projections.
- Reduced loan provisions.
- Branch closures and criticisms.
Lloyds Banking Group’s third-quarter profit marginally exceeded initial projections due to a significant reduction in impairment charges.
The banking giant reported pre-tax profits for the three months ending in September amounting to £1.86 billion, surpassing the £1.8 billion forecast by analysts and increasing profits by more than threefold compared to the restated £576 million earned in the previous year due to accounting adjustments.
Loan Provisions and Asset Quality
The company allocated £187 million for loan loss provisions, a decrease from £668 million in the corresponding period of 2022 and £419 million in the preceding quarter. The company attributed this discrepancy to “resilient asset quality and generally stable credit trends.”
Revenue Growth and Loan Volumes
At £4.5 billion, net income remained comparatively stable as a result of increased distributions to savers, decreased customer deposits, and marginally weakened mortgage rates.
Nevertheless, revenue surged by over £900 million to £13.7 billion over the course of nine months, despite a decline in loan volumes caused by the bank’s divestment from a legacy portfolio of retail mortgages.
“Start your investing journey with a gift! Claim your free Webull shares.”
The London-listed group’s net interest margin, a key indicator of profitability and the difference between what lenders charge borrowers and pay savers, increased by 31 basis points to 3.15 percent in the most recent fiscal year, partly due to the Bank of England’s ongoing interest rate increases.
Pre-tax profits increased by £2 billion to £5.7 billion from January to September, in conjunction with a decline in volatility-related costs and a plateau in operating expenses.
As a result, the organization has maintained its annual guidance, which stipulates a banking net interest margin in excess of 310 basis points and a return on tangible equity exceeding 14 percent.
Lloyds’ chief executive officer, Charlie Nunn, stated, “Strong capital generation and robust financial performance in the first nine months of the year were the result of robust asset quality, cost discipline, and net income growth.”
The results of Lloyds are released one day after Barclays disclosed a decline in its third-quarter profits to £1.9 billion, primarily attributable to deteriorating performance in its investment banking operations.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, remarked, “Lloyds’ update should provide some reassurance regarding the sector’s resilience after yesterday’s sell-off of banks was prompted by Barclays’ mixed results.”
She further stated, “Today’s update contains no unexpected information, which should reassure the market, and Lloyds seems to be retaining cash in anticipation of opportunities that may arise in the coming months.”
Branch Closures and Criticisms
Critics have criticized both Barclays and Lloyds for closing dozens of high street branches this year, despite the fact that a significant number of Britons, especially the elderly, depend on them to obtain financial services.
The former company is projected to close approximately 180 physical locations by 2023, whereas the latter has 155 locations, with 75 more scheduled to close the following year.
Lloyds announced that 18 Lloyds branches, 15 Halifax locations, and two Bank of Scotland sites will cease operations between January and September 2024.
Future Plans and Market Response
This comes as the organization requires employees to be present at the office a minimum of two days per week in an effort to boost productivity.
In early trading, Lloyds Banking Group shares were down 0.4p, or 1%, to 40.2p; since the start of the year, they have declined by approximately 14%.
