Lloyds Banking Group, one of the UK’s biggest banks, has reported a surprising drop in profits. Even though the bank earned more money overall, its pre-tax profit fell by 7% compared to the same period last year. The main reason? Lloyds had to spend more than expected to protect itself from possible money problems in the future.
In numbers, Lloyds saw its net income (the money it brings in before taking out costs) rise by 4% to £4.39 billion. But its profits before taxes dropped to £1.52 billion. That’s because the bank had higher costs this time around, especially when it came to setting money aside for potential loan losses.
Banks often prepare for the chance that some people won’t be able to repay their loans. This is called an “impairment charge.” Lloyds had expected to set aside £274 million for this, but instead, they ended up putting aside £309 million. That extra money—£35 million more—was linked to worries about the effects of trade tariffs set by former US President Donald Trump.
Even though Lloyds doesn’t have a lot of business in the United States, the bank is being careful. Problems in big economies like the US can affect the UK, especially if it makes trade and business harder. That’s why the bank says it’s staying “vigilant,” which means they are watching things closely just in case.
Record-Breaking Mortgage Lending Day
While profits dipped, Lloyds had some good news on the home loan front. March turned out to be the bank’s busiest month ever for mortgage lending. Thousands of first-time buyers rushed to complete their home purchases before new stamp duty rules came into effect in April.
Stamp duty is a type of tax that people in England and Northern Ireland have to pay when buying property. Before April, first-time buyers didn’t have to pay this tax if their new home cost up to £425,000. But after 1 April, that number dropped to £300,000. Because of this change, many people hurried to finish buying their homes in March.
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The bank said that on one record-breaking day—Thursday 27 March—around 5,000 first-time buyers completed their home purchases. In total, Lloyds lent money to 20,000 new buyers between January and March. The value of all the mortgages it handed out grew by nearly £5 billion during those three months.
In March alone, the number of completed home purchases jumped by 50% compared to usual. This was one of the busiest times Lloyds has ever seen for helping people buy homes.
The bank also shared that it now believes house prices in the UK will rise by about 2.9% this year. That means homes could become slightly more expensive.
Interest Margins Up, Car Loan Issue Still on Hold
Lloyds also shared an update on how much money it earns from the difference between loan interest and what it pays on savings. This is called the “net interest margin.” That number grew slightly from 2.97% to 3.03%, meaning the bank is making a little more profit from its lending services.
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Another part of Lloyds’ business is car loans. It’s the biggest lender for car finance in the UK. Earlier this year, the bank set aside £700 million to cover possible compensation related to a car finance commission issue. Some customers may have been charged too much when they bought cars using loans. A court decision expected in July will determine who might get money back.
For now, Lloyds hasn’t added more money to cover these car loan complaints. It’s waiting to see what the court says before making any new decisions.
