Lloyds Banking Q1 2024 Net Interest Income Misses Estimates Amid Pressure to Increase Saver Rates

Lloyds Bank reports 28% drop in Q1 profit, cites 'competitive pressures' and higher costs. Despite challenges, bank reaffirms full-year guidance and forecasts rise in UK house prices.

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Nasiru Eneji Abdulrasheed
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Lloyds Banking Q1 2024 Net Interest Income Misses Estimates Amid Pressure to Increase Saver Rates

Lloyds Banking Q1 2024 Net Interest Income Misses Estimates Amid Pressure to Increase Saver Rates

Lloyds Banking Group reported a 28% drop in first-quarter profit before tax to £1.63 billion, with profit attributable to ordinary shareholders falling 29% to £1.07 billion. The bank's net interest income fell short of estimates, coming in at £3.1 billion for the quarter, below the £3.2 billion expected by analysts.

Lloyds cited 'competitive pressures' as a reason for the lower-than-expected net interest income, as it had to raise deposit rates to retain customers amid rising interest rates. The bank's chief financial officer said Lloyds was 'having to be more competitive' on savings rates, which impacted its net interest margin, declining to 2.95% from 3.22% a year ago.

The lender's performance was also impacted by an 11% jump in operating costs to £2.4 billion. Despite the challenges, Lloyds' chief executive, Charlie Nunn, stated that the group is continuing to deliver in line with expectations in the first quarter of 2024.

Why this matters: As the UK's largest mortgage lender, Lloyds Banking Group's performance is a key indicator of the health of the country's banking sector and economy. The pressure to increase saver rates amid rising interest rates highlights the challenges banks face in balancing profitability with customer retention.

Looking ahead, Lloyds reaffirmed its full-year guidance, including a stabilization in net interest margin, an increase in mortgage demand, and a return on tangible assets of around 13%. The bank also took a lower-than-expected impairment charge of £57 million, indicating the resilience of its borrowers and robust asset quality. Lloyds forecast house prices to rise by 1.5% in 2024, compared to previous expectations of a 2.2% fall, and hinted at the possibility of revising its guidance upwards later in the year if conditions continue to improve.

Key Takeaways

  • Lloyds Q1 profit fell 28% to £1.63bn, net interest income missed estimates.
  • Lloyds raised deposit rates to retain customers, impacting net interest margin.
  • Operating costs jumped 11% to £2.4bn, but Lloyds reaffirmed full-year guidance.
  • Lloyds forecasts 1.5% house price rise in 2024, up from previous 2.2% fall.
  • Lloyds' performance reflects challenges banks face in balancing profitability and customer retention.