No need to worry about rising bad loans, Lloyds insists as quarterly profits soar to £2.3bn
Lloyds said a ‘modest’ rise in borrowers in arrears was not cause for alarm as quarterly profits rose to £2.3bn.
Rising interest rates have stimulated lenders but put pressure on borrowers, some of whom are finding it harder to pay.
Lloyds, Britain’s largest mortgage lender, said while more borrowers were falling into arrears and unable to pay their loans, they were at or below pre-pandemic levels.
Rate hikes: Lloyds, Britain’s largest mortgage lender, said while more borrowers were falling into arrears and unable to pay their loans, they were at or below pre-pandemic levels
Problems mainly related to loans sold before the 2008 crisis, when buyers went too far.
Chief financial officer William Chalmers said, “It’s very modest and doesn’t worry us.”
The group, which owns Lloyds Bank as well as Halifax and Bank of Scotland, took on £243m for the risk of loans going bad.
Earnings in the first quarter were 46 percent higher than the same period a year ago, as the rise in interest rates increased the net interest margin, the difference between what lenders earn from borrowers and savers.
Interest rates are expected to rise even further, but the bank has not raised its full-year outlook, suggesting caution. Shares fell 3.6 percent, or 1.7 pence, to 45.98 pence.
Lloyds slightly raised its outlook for the UK economy, but expects GDP to contract by 0.6% in 2023 and house prices to fall by 5.3%.
Chief executive Charlie Nunn said: “The macroeconomic outlook remains uncertain.”
Lloyds was the last British bank to report quarterly results over the period when several US lenders went bankrupt, as was 167-year-old Credit Suisse.
Lloyds seemed to shake off the crisis as earnings exceeded expectations. But it has seen a £2.2bn drop in deposits.
Smaller rival Metro Bank said it enjoyed a second quarter of profitability. Metro also saw a deposit outflow – of £400m – during the period.