Lloyds Earnings: Decent Quarter as Firm Sets Aside for Tariff Risks

We expect scrutiny of the firm’s ability to diversify its income streams away from interest-rate-dependent mortgage lending to increase again.

Niklas Kammer 5 May, 2025 | 7:32PM
Facebook Twitter LinkedIn

Lloyds Bank branch in the City of London.

Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research.

Morningstar’s Metrics for Lloyds


What We Thought of Lloyds’ Earnings

Lloyds LLOY reported underlying profits of GBP 1.53 billion for the first quarter of 2025, down 13% versus the same period a year ago. Higher loan losses this year, driven by a GBP 100 million overlay charge to cover potential tariff-induced risks, drove the divergence in performance versus last year. However, loan losses of 27 basis points were decent. Last year, the bank also booked reversals in its commercial banking unit, which made for a difficult comparative base. Lloyds continues to guide for a 25-basis-point loan loss ratio for the year.

We maintain our fair value estimate and narrow moat rating. Operating performance was decent. Net interest income grew by 3% to GBP 3.29 billion, supported by the structural hedge. Mortgage and deposit growth of 2% and 1%, respectively, were good, given market conditions. Other income grew by 8% to GBP 1.45 billion. Progress in increasing the firm’s non-interest-rate-related income share has seen a step change in performance in the first half of last year but has slowed since. We expect scrutiny of Lloyds’ ability to diversify its income streams away from interest-rate-dependent mortgage lending to increase again.

Operating costs increased by 6% to GBP 2.55 billion, half of which was severance pay and strategic costs, as was expected. Operating cost guidance of GBP 9.7 billion for the full year was unchanged.


The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Niklas Kammer  is an equity analyst sfor Morningstar

© Copyright 2025 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures