Lloyds Q1 Pretax Profit Beats Estimates On Strong Net Interest Income And Increased Rates
- Lloyds Banking Group PLC (NYSE: LYG) reported a Q1 2023 net income growth of 15% Y/Y to £4.7 billion on ongoing recovery and increased rates.
- EPS of 2.3 pence in Q1 2023 was higher than 1.4 pence a year ago.
- Pretax profit rose 46% Y/Y to £2.3 billion in Q1, exceeding the consensus of £1.95 billion, as per Reuters.
- Underlying net interest income rose 20% Y/Y to £3.5 billion, led by a solid interest margin of 3.22% (+54 basis points Y/Y) and increased average interest-earning assets.
- Operating expenses increased 5% Y/Y to £2.2 billion due to higher planned strategic investment, the cost of new businesses and the impact of inflation.
- Loans and advances to customers rose slightly to £452.3 billion in Q1 from £451.8 billion a year ago, with growth in open mortgage book (+1% Y/Y), corporate and institutional banking (+7% Y/Y), UK Motor Finance (+4% Y/Y) and other retail lending (+23% Y/Y) businesses.
- Customer deposits fell 2% Y/Y to £473.1 billion, with reduced retail current account balances (-2% Y/Y) and commercial banking deposits (-2% Y/Y).
- The company's open book assets under administration stood at £165 billion at the end of Q1, with the company witnessing net new money of £2 billion on organic growth in Insurance, Pensions Investments and Wealth assets.
- The underlying impairment charge was £243 million in Q1, vs £177 million a year ago.
- CET1 ratio stood at 14.1% compared with 14.2% in the prior-year quarter.
- Return on tangible equity was 19.1% higher than 10.7% a year ago, and the asset quality ratio expanded to 0.22% (from 0.16% in the prior year quarter).
- Repurchase: The company bought back 0.8 billion shares in Q1 2023.
- 2023 Outlook: LYG expects the banking net interest margin to be higher than 305 basis points, operating costs to be around £9.1 billion, asset quality ratio to be about 30 basis points, return on tangible equity to be around 13% and capital generation to be about 175 basis points.
- Price Action: LYG shares traded lower by 3.60% at $2.27 on the last check Wednesday.
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