Lloyds Banking Group reveals earnings dip as boost from borrowing costs slows
Lloyds has revealed its earnings dipped in the first half of the year as the banking giant generated less income despite borrowing costs remaining higher.
The banking group, which also includes Halifax and Bank of Scotland, said it made a pre-tax profit of £3.3bn in the first six months of the year.
This marks a 14 per cent decline from the £3.9bn reported this time last year although it is higher than some analysts had predicted.
It came as the group said its net interest income fell by a tenth year on year, which is the amount it generates from loans minus what it pays out on savings.
Lloyds was among the UK lenders to report bumper profits last year, with its income boosted by higher interest rates which allow banks to charge more for loans.
Nevertheless, the bank also revealed that its balance sheet grew, with the amount it lent to customers jumping by £2.7bn.
Customer deposits also increased over the period, with an additional £4.9bn put into savings and current accounts.
Meanwhile, Lloyds is looking to make about £1.2bn worth of cost savings from changes to its wider strategy, and unlock about £700m worth of extra income, which it said it is on track to achieve.
Chief executive Charlie Nunn said the bank delivered “robust financial results” in the first half and that 2024 is a “key year for our strategic delivery”.
Richard Hunter, Head of Markets at interactive investor, commented “With a resilient performance amid a higher interest rate environment and with some promising signs of growth, Lloyds has provided a timely reminder as to why it is often seen as a barometer for the wider UK economy.
"An improvement in the second quarter bodes well for the remainder of the year, with the additional possibility that the trough has been reached with regard to the crucial metric of Net Interest Margin (NIM).
"The figure has held steady at 2.94 per cent, with the bank cautiously guiding for a figure in excess of 2.9 per cent for the year as a whole.
"At the same time, the so-called structural hedge, which lessens the group’s susceptibility to changes in interest rates, could also provide further income to offset pressures elsewhere.
"In all, the results are steady rather than spectacular, even though there is the promise of brighter times ahead.
"The cool reaction to the update in opening trade comes against a weaker wider market, but does little to undermine a recent performance which has seen the share price rise by 30 per cent over the last year, as compared to a gain of 6 per cent for the wider FTSE100, including a particularly strong six-month run of late which propelled the price 42 per cent higher.”