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Lloyds Banking Group’s first-quarter profits fell to £1.5bn as it set aside more money than expected for bad loans in anticipation of the economic impact from US tariffs.
The high-street bank said on Thursday that pre-tax profits for the first three months of the year fell 7 per cent from the same period in 2024, in line with analyst expectations. Revenues rose 4 per cent year on year to £4.4bn.
The bank set aside £309mn for bad loans, higher than analysts’ expectation of £279mn, as it added a £35mn provision to account for changes in the economic outlook linked to US President Donald Trump’s tariffs.
Lloyds, seen as a bellwether for the UK economy, indicated that overall credit quality remained resilient, with “stable and benign credit performance in the first quarter”.
Net interest margin — the difference between the interest it charges on loans and the rate it pays on customer deposits — rose to 3.03 per cent, from 2.97 per cent in the previous quarter.
The boost was driven by so-called structural hedging, which the bank uses to smooth the impact of falling rates on its margins.
The bank did not make any additional provisions linked to potential liabilities from its motor finance business. It previously set aside more than £1bn to cover the costs of a probe into the potential mis-selling of car loans, including a £700mn provision in February.
The industry is awaiting a Supreme Court decision on whether it was lawful for banks to pay commission to car dealers if customers had not given informed consent for such an arrangement.
Lloyds is entering the final stages of a £4bn investment plan to develop new revenue streams that are less closely tied to the interest rate cycle, and digitising its operations to cut costs and improve returns. It has announced 316 branch closures and 500 job cuts so far this year.
