Lloyds bank says profits soar on higher interest rates

Britain's Lloyds Banking Group said Wednesday (3 May) that net profit jumped 50% in the first quarter, as revenues were boosted by rising interest rates.

Profit after taxation rallied to o1.5 billion ($1.9 billion) in the three months to March from a year earlier, Lloyds said in a statement.

It added that income swelled 18% to o3.4 billion, lifted by "the higher (interest) rate environment".

The news comes after rivals Barclays, HSBC and NatWest all posted strong earnings, as higher interest rates attract more savers and increase returns on bank loans.

The Bank of England and its global counterparts have ramped up borrowing costs in a bid to tackle runaway inflation, fuelled partly by rampant energy bills.

British inflation remains stubbornly above 10% despite a series of BoE interest rate hikes since late 2021.

But the increases have also prompted retail banks like Lloyds to hike their own rates on loans including mortgages, further worsening Britain's cost-of-living crisis.

"The group has delivered a solid financial performance in the first quarter of 2023, with strong net income and capital generation, alongside resilient observed asset quality," chief executive Charlie Nunn said in the statement.

"The macroeconomic outlook remains uncertain. We know that this is challenging for many people."

Pre-tax profit soared 26% to o2.3 billion in the reporting period.

Yet the lender also took an impairment charge of o243 million despite a slight improvement in the economic outlook.

Lloyds said it observed "modest" increases in the number of borrowers falling into arrears and defaulting on loans amid Britain's cost-of-living crisis.

However, these levels remain "at or below" those witnessed before the Covid pandemic, it said.