Lloyds profits plummet as rising interest rates are used to bail out coffers

Shares of Lloyds Banking Group jumped after the lender raised its profit forecast and increased its dividend payout to shareholders.

But the group saw its pre-tax profit fall 6% to £3.7bn in the six months to the end of June, from £3.9bn at the same time a year ago. The £3.7billion figure was higher than forecast of around £3.2billion.

The lender said it had set aside £377m to cover a possible increase in defaults as interest rates rise in a tough economy.

Update: Lloyds Banking Group shares jumped after the lender raised its profit forecast and increased its dividend payout

The bank said its higher provision for impairment reflected risks posed by inflation and rising interest rates, but additional defaults were low and its finances had proved resilient so far.

Galloping inflation at 40-year highs, however, threatens to push Britain back into recession.

As central banks raise rates to fight inflation, banks are taking advantage of the widening gap between what they charge borrowers and what they pay savers. But higher rates can also trigger defaults as customers struggle to meet their repayments.

Lloyds said underlying profits – without taking into account the impact of the change in default provisions – rose by more than a third to £4.1bn. Net income jumped 65% to £7.2bn for the six months to June 30.

It proposed an interim dividend of 0.8p per share, up 20% from the first half of last year.

Signaling confidence in the near future, Lloyds raised its forecast for return on tangible equity, a key measure of profitability, to 13% for 2022, from a forecast above 11% in March.

Its mortgage portfolio swelled by more than £3bn in the period as the buoyant UK property market helped the nationally oriented banking group.

Lloyds Shares rose today and rose 4.47% or 1.94p to 45.48p in early morning trading.

Boss Charlie Nunn said: “While uncertainties persist, our measured approach to risk is demonstrated by the quality of our assets, with no current deterioration seen across the portfolio.”

Nunn is implementing an updated strategy for the lender aimed at digitizing the bank and increasing fee income in areas such as wealth management.

The performance of Lloyds’ core retail banking and lending businesses mirrored its retail-focused U.S. counterparts, such as Bank of America, which earlier this month reported better-than-expected earnings.

The Bank of England is set to raise its benchmark interest rates again next week, with investors betting on the biggest rise since 1995 – a rise of half a percentage point to 1.75%.

Lloyds said it has seen customers drop 2.2 million subscription services since last summer in the face of soaring inflation as it posted a drop in half-year profits.

Dividend: Lloyds Banking Group has proposed an interim dividend of 0.8p per share, up 20% from the first half of last year

Dividend: Lloyds Banking Group has proposed an interim dividend of 0.8p per share, up 20% from the first half of last year

The bank said it was seeing increasing signs of customers battening down the hatches amid the cost of living crisis, hoarding savings for a financial buffer and cutting non-essential subscriptions.

But he said he had yet to see an increase in the number of borrowers in arrears, despite inflationary pressures.

Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said: “Lloyds entered the six-month court battles. Half-year results show a marked improvement in net interest income, as rate hikes and picking up consumer activity in the UK boosted performance, the difference between what Lloyds earns in interest on loans and the amount he pays in interest on deposits, moving in his favor.

“The impairment charges sound significant on paper, but were actually rather benign in nature. This, combined with the improved efficiency profile, bodes well for future yields. The framework is also set for significantly improved profitability, which increases the gap between expectations and the valuation of the group, potentially paving the way for further takeovers.

“The mortgage portfolio swelled by more than £3bn as the buoyant UK property market helped the nationally oriented banking group. As a long-term trend, this should be seen as a strong plus, but bear in mind that a sharp economic shock could ease the pressure on the mortgage brokerage in the medium term.

Richard Hunter, Head of Markets at Interactive Investor, said: “Despite an increasingly difficult economic backdrop in the UK, Lloyds had an impressive start to the year on most measures.”;

He added: “The share price has struggled to keep pace with this progress, partly given that it is often seen as a barometer of the UK economy.”

“Shares have fallen 6.5% over the past year, compared to a 4.4% gain for the broader FTSE 100, although the fact that the bank has raised its forecast should engender more confidence. strong, as evidenced by the initial price reaction to the numbers.

“Indeed, and without exception, the market consensus for UK banks is currently positive. Lloyds may no longer be the group’s choice given lingering concerns over the state of the UK economy, but the broad view of the shares as a buy reflects confidence in the bank’s ability to hold a firm hand on the bar.

66 other Lloyds and Halifax branch closures

Lloyds Banking Group will close 66 more bank branches between October and January next year, it revealed on Tuesday.

He confirmed that 48 Lloyds Bank branches and 18 Halifax branches will close as part of a general trend that has seen major banks abandon the high street and move to increased online banking.

The additional closures come just two months after the credit giant announced plans to close 28 branches between August and November this year.

Here is the list of the 66 branches that close between October and January:

Lloyd’s, Bromyard

Lloyd’s, Chigwell

Lloyds, Catterick Garrison

Lloyds, Malvern Link

Lloyds, Redruth

Lloyds, Lutterworth

Lloyd’s, Palmers Green

Lloyds, Cheadle

Lloyds, Lytham St Annes

Lloyd’s, New Ollerton

Lloyds, Paternoster Square, London

Lloyds, Earls Court Road, London

Lloyds, Leadenhall Street, London

Lloyd’s, Axminster

Lloyds, Barton on Humber

Lloyd’s, Belper

Lloyds Intake, Sheffield

Lloyds, The Moor, Sheffield

Lloyds, Tilehurst, Reading

Lloyd’s, New Romney

Lloyds, Edgbaston, Birmingham

Lloyds, Weoley Castle, Birmingham

Lloyd’s, Billericay

Lloyd’s, Immingham

Lloyd’s, Tonbridge

Lloyds, Edgware Road, Paddington, London

Lloyd’s, Notting Hill Gate, London

Lloyd’s, Sandbach

Lloyd’s, West Wickham

Lloyd’s, Darlaston

Lloyd’s, Purley

Lloyd’s, Aldridge

Lloyd’s, Rothbury

Lloyds, Wootton Basset

Lloyd’s, Guisborough

Lloyd’s, Cheddar

Lloyds, Cinderella

Lloyd’s, Cleobury Mortimer

Lloyd’s, Holyhead

Lloyd’s, Wallingford

Lloyds, Bishop’s Waltham

Lloyd’s, Helston

Lloyd’s, Looe

Lloyds, Slaithwaite

Lloyds, Welsh

Lloyds, PwllheliLloyds, Caldicot

Lloyds, Llandrindod Wells

Halifax, High Holborn, London

Halifax, Hitchin

Halifax, Ripon

Halifax, Stowmarket

Halifax, Newry

Halifax, Whitchurch

Halifax, Dorking

Halifax, Mitchell

Halifax, Reford

Halifax, Tiverton

Halifax, Tottenham Ct Rd, London

Halifax, Windsor

Halifax, Stroud

Halifax, Ruislip

Halifax, Birmingham

Halifax, Rawtens Valley

Halifax, Coleraine

Halifax, Warminster

Some links in this article may be affiliate links. If you click on it, we may earn a small commission. This helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any business relationship to affect our editorial independence.


Source link