Lloyds share price in focus as lender releases first-quarter results
Lloyds Banking Group Plc (LON:LLOY) has this morning updated investors on its first-quarter performance.
**Highlights from Lloyds’ statement:**
· Underlying profit of £2,178 million, an increase of 21 per cent on the first quarter of 2014; Total income up 3 per cent to £4,644 million; Net interest income of £3,021 million, up 7 per cent, primarily driven by margin improvement to 2.65 per cent; Other income of £1,623 million, down 6 per cent on the first quarter of 2014 due to business disposals in 2014 and lower Retail fees and commissions, but up 5 per cent on the fourth quarter of 2014; Total costs flat year-on-year with increased investment in the business; cost:income ratio of 47.7 per cent (Q1 2014: 49.3 per cent); Impairment charge reduced 59 per cent to £177 million; asset quality ratio improved 20 basis points to 0.15 per cent; Profit before tax and the sale of TSB up 37 per cent to £1,874 million; Loss relating to TSB sale of £660 million; Underlying return on required equity of 16.0 per cent, up 3.0 percentage points on the first quarter of 2014; Strong balance sheet and liquidity position with a CET1 ratio of 13.4 per cent, up 0.6 percentage points in the quarter; a total capital ratio of 22.6 per cent; and a leverage ratio of 5.0 per cent (31 December 2014: 4.9 per cent); Reported statutory profit before tax of £1,214 million; Tangible net assets per share increased to 55.8p (31 December 2014: 54.9p).
GROUP CHIEF EXECUTIVE’S STATEMENT
In 2015 we celebrate the 250th anniversary of Lloyds Bank and the 200th anniversary of Scottish Widows. In the first quarter of this milestone year we made further strategic progress. We have delivered a significant improvement to underlying profitability and balance sheet strength while at the same time continuing to support and benefit from UK economic growth.
Strong financial progress
Underlying profit increased by 21 per cent to £2,178 million, driven by increased income and lower impairments, and our underlying return on required equity improved to 16.0 per cent from 13.0 per cent. Statutory profit before tax was £1,214 million compared with £1,369 million in 2014. Our balance sheet position has strengthened further, with a common equity tier 1 ratio of 13.4 per cent and a leverage ratio of 5.0 per cent, up from 12.8 per cent and 4.9 per cent respectively at the end of 2014.
Continuing to support our customers and the UK economy
We are making excellent progress on our lending commitments as outlined in our Helping Britain Prosper Plan. In UK housing we continue to be the largest lender to first-time buyers, providing one in four mortgages, and lending £2.2 billion in the first three months of the year. Through our commitment to the commercial sector, we have supported over 23,000 business start-ups and remain the largest participant in the Funding for Lending Scheme.
Strong start to the next phase of our strategic journey
In October 2014 we outlined three strategic priorities to take us through to the end of 2017: creating the best customer experience; becoming simpler and more efficient; and delivering sustainable growth.
On creating the best customer experience, we continue to invest in our customer propositions including new digital initiatives such as Halifax Car Plan Extra, which allows customers to access a range of car financing options online. In addition, customers can now apply for a new credit card using a mobile device and youth customers are able to manage their accounts online.
We continue to make good progress on becoming simpler and more efficient. Our cost:income ratio was 47.7 per cent and we remain on track to deliver a full year reduction against the 2014 position of 49.8 per cent. Delivering sustainable growth is a key element in supporting customers and the UK economy. Over the last 12 months we have lent an additional net £6.3 billion to our key customer segments, including £1.1 billion to SMEs.
TSB disposal and UK government trading plan
We agreed the sale of our remaining stake in TSB to Banco de Sabadell in the first quarter and as part of this agreement we sold 9.99 per cent of our stake in March. The full disposal of TSB will enable us to meet our commitment to the European Commission ahead of the mandated deadline.
Our strong performance in the first quarter has also enabled the UK government to continue to reduce its holding in the business, further enabling our return to full private ownership. Following the announcement in December 2014 of a plan to carry out a measured and orderly sell down of shares over the first half of 2015, the UK government’s stake is now 20.95 per cent, less than half its original stake.
Well positioned to make further progress in 2015
I am confident that the successful delivery of our strategy through our simple, low risk, customer focused, UK retail and commercial banking business model will enable us to become the best bank for customers and deliver strong and sustainable returns for shareholders. It also remains our intention to pay an interim and a final dividend for 2015.
**More to follow…**
As of 06:44 BST, Friday, 01 May, Lloyds Banking Group share price is 78.53p.
