Lloyds Bank ‘prepared for further Brexit uncertainty’ as profits stay flat
Lloyds Bank is prepared to weather further Brexit uncertainty, the group’s chief executive said today as the bank reported results for the first quarter.
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The figures
Profit before tax was flat at £1.6bn, the bank said this morning, while underlying profit was up eight per cent to £2.2bn, driven by an increase in income and lower operating costs.
Net income increased by two per cent to £4.4bn from the first quarter of last year while operating costs fell four per cent to £1.97bn.
Earnings per share were up two per cent to 1.49p.
The bank reported additional charges of £339m, which included the cost of exiting an investment management agreement with Standard Life Aberdeen, and it recorded a charge of £100m for insurance to cover the cost of a growing number of complaints.
Restructuring costs were down nine per cent to £126m as the bank completed the migration of credit card provider MBNA and paid out initial costs related to a personal wealth joint venture Schroders.
Why it's interesting
The first quarter results follow disappointing updates from Royal Bank of Scotland and Barclays, who both cited Brexit uncertainty as the reson for slowing business investment.
Today Lloyds said that continuing Brexit uncertainty is likely to hurt the UK economy overall, but reaffirmed all of its own financial targets.
The bank's core capital ratio, which measures financial strength, rose three points to 14.2 per cent.
What Lloyds said
“In the first three months of 2019 we have again delivered a strong business performance with continued strategic progress, increased statutory and underlying profit and strong financial returns,” Lloyds Bank chief executive Antonio Horta-Osorio said.
“While Brexit uncertainty persists, and continued uncertainty could further impact the economy, I remain confident that our unique business model, and in particular our market leading efficiency and targeted investment, will continue to deliver superior performance and returns for our customers and shareholders.”
What analysts said
John Moore, senior investment manager at Brewin Dolphin, said: “Today’s results from Lloyds build on the good news about the bank’s capital guidance and reaffirm its as one of the financially strongest banks, paving the way for a potential share buyback or higher dividends.
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"However, whether that happens will depend on the economic cycle and it’s worth noting that, in a departure from the bank’s last update, we have a statement on ‘Brexit uncertainty’ today.
"In any case, Lloyds’ net interest margin is stronger than many of its peers and its cost-income ratio is tidy. The beauty of Lloyds is in its simplicity, redoubled efforts on an efficient core business, and the strength of its balance sheet; but, Brexit clouds continue to hang over the entire banking sector, which may act as a drag on its share price."