Shares in Lloyds (LLOY) drifted lower in early trade despite the banking group posting better-than-expected Q1 profits. Lloyds also lifted its FY26 net interest income guidance while confirming its capital generation and solvency targets.
Small beat across the board
Net interest income for Q1 was £3.6 billion, up 8% on Q1 2025 and marginally above the consensus of £3.55 billion. For the full year, LLoyds now sees net interest income surpassing £14.9 billion.
Operating costs of £2.5 billion were down 2% on last year and marginally below analysts’ forecasts of £2.55 billion. Also, underlying impairment charges were £295 million against analysts’ forecasts of £380 million.
As a result, pre-tax profit rose 33% to £2 billion, comfortably above £1.84 billion company-compiled consensus. Earnings per share rose from 2.2p to 2.4p while the RoTE (Return on Tangible Equity) increased from 15.7% to 17%.
‘The group delivered sustained strength in financial performance, growing our income, maintaining our cost discipline and delivering strong profitability’, commented CEO Charlie Nunn. ‘We are confident in our delivery for the year ahead and reiterate our guidance for 2026’, added Nunn.
There’s nothing to fault in today’s update from Lloyds – as the CEO says, it’s grown income, controlled costs and delivered strong profits. We suspect the sell-off is down to the bank’s cautious assumptions for the rest of the year.
Scrolling towards the bottom of the statement, we get to the base case economic scenario for 2026 and 2027. Unsurprisingly, the bank now sees lower GDP growth, higher unemployment and more limited gains in residential and commercial property prices.
Also, increases in energy costs mean a re-emergence of inflationary pressures, with reductions in the UK Bank Rate now postponed until 2027. All in all, it’s a perfectly plausible base case, just not one investors can feel good about.
Read the press release here:
https://www.lloydsbankinggroup.com/investors.html
