TOP NEWS: Horta-Osorio leaves Lloyds on back of surging profits

(Alliance News) - Outgoing Lloyds Banking Group PLC Chief Executive Antonio Horta-Osorio went out ...

Alliance News 28 April, 2021 | 8:52AM
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(Alliance News) - Outgoing Lloyds Banking Group PLC Chief Executive Antonio Horta-Osorio went out with a bang as profit shot up in the first quarter of 2021.

Shares in Lloyds were up 3.5% in London on Wednesday morning at 45.10 pence each.

Pretax profit for the three months to the end of March surged to GBP1.90 billion from just GBP74 million a year ago, aided by a net impairment credit of GBP323 million, versus a charge of GBP1.43 billion a year ago.

"The net credit in the quarter was driven by continued strong asset quality with a low charge of GBP209 million given the continued benign credit environment and a GBP459 million release of expected credit loss allowances resulting from improvements to the UK's economic outlook," the lender said.

Net income in the first quarter fell 7% to GBP3.66 billion from GBP3.95 billion, with net interest income falling 9% to GBP2.68 billion from GBP2.95 billion.

Lloyds recorded a banking net interest margin of 2.49%, weakened from 2.79% the year before, reflecting the "lower rate environment".

"The group's banking net interest margin was up 3 basis points compared to the fourth quarter of 2020 reflecting the continued optimisation of the Corporate & Institutional book within Commercial Banking, strong customer deposit inflows and funding and capital benefits following the liability management exercise in the fourth quarter of 2020. Relative to the fourth quarter of 2020, lower structural hedge net interest income was largely offset by growth in mortgage volumes at attractive margins," Lloyd's added.

Total costs slipped to GBP1.92 billion from GBP1.96 billion, but the lender still saw its cost-to-income ratio worsen to 52.3% from 49.7%.

Lloyds ended the quarter with its loan book at GBP444 billion, up slightly from GBP443 billion the year before and up from GBP440 billion at the end of 2020. The lender's open mortgage book grew 6% year on year to GBP283.3 billion.

Customer deposits totalled GBP462 billion at the end of the quarter, compared to GBP428 billion the year before.

Lloyds CET1 ratio at March 31 stood at 16.7%, up from 14.2% at the same point the year before.

Given the "solid performance" in the first quarter of 2021, Lloyds enhanced its guidance for 2020. Its net interest margin is now expected to be in excess of 245 basis points, after posting 249 basis points for the first quarter, and operating costs to be reduced to GBP7.5 billion.

The lender's statutory return on tangible equity for 2021 is now expected to be between 8% and 10% - compared to 13.9% in the first quarter - excluding about 2.5 percentage point benefit from tax rate changes.

"The long-run transformation of the group has positioned the business well to address the challenges of the pandemic. We have made a strong start to the year with the quarterly results and on delivering Strategic Review 2021," said Chief Executive Horta-Osorio.

"It is with both pride and sadness that I will step down as group chief executive later this month. Most importantly, the group is well-placed for sustainable success and the publication of Strategic Review 2021 in February shows that the group has clear execution outcomes for 2021, underpinned by long-term strategic vision."

HSBC Wealth & Personal Banking head Charlie Nunn will become the new Lloyds CEO on August 16. Lloyds Chief Financial Officer William Chalmers will be interim-CEO after Horta-Osorio departs and before Nunn comes in.

By Paul McGowan;

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Lloyds Banking Group PLC 46.43 GBX -3.17

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