- Lack of surprises and upgrades disappoints
- Shares drift after update
- Metro Bank and OSB Group rally
After solid gains for Barclays (BARC) and HSBC (HSBA) and a loss for shares in NatWest Group (NWG), investors were eyeing the first-quarter update from the UK’s largest lender Lloyds Banking Group (LLOY) to complete the picture.
In the event, the results were mostly as expected and without an upgrade to the full-year outlook attention quickly waned leaving the shares trading 0.6% lower at 47.4p.
MOVE ALONG, NOTHING TO SEE HERE
In fairness, Lloyds doesn’t do ‘radical’ so there were never going to be any big surprises in the results and investors who prefer the quiet life won’t be disappointed by the bank’s steady if unexciting performance.
Net income for the first three months was up 15% to £4.65 billion, driven by a 20% increase in net interest income to £3.54 billion on the back of higher rates and a larger loan book.
Operating costs were kept in check, rising just 5% to £2.2 billion, leading to an industry-leading (and forecast-beating) cost-to-income ratio of just 47.1% against 52.3% in the same period a year ago.
Loans and deposits were broadly flat, with the bank describing its loan book as ‘well-positioned in the context of cost-of-living pressures’ – as a result, the £200 million of provisions for potential credit losses were lower than expected.
‘The group has delivered a solid financial performance in the first quarter of 2023, with strong net income and capital generation, alongside resilient observed asset quality’, commented chief executive Charlie Nunn.
Jefferies financials analyst Joseph Dickerson politely described the results as ‘solid’ but bemoaned the lack of upgrade potential in the full year outlook, in particular the top line where – as in the case of NatWest – the market was looking for a positive steer following recent rate hikes.
SMALLER BANKS SHINE
In contrast, specialist mortgage lender OSB Group (OSB) – whose brands include Charter Savings Bank and Kent Reliance building society – pleased investors with its first quarter update and an increase in its outlook for loan growth this year, sending its shares up 7p or 1.5% to 489p.
The bank grew its loan book by 3% to £24.2 billion and raised its forecast for full-year growth from 5% to 7%, while deposits surpassed the £20 billion mark for the first time.
Meanwhile, challenger lender Metro Bank (MTRO) posted a second consecutive quarterly profit and said it had seen deposit inflows in March, which was ‘the strongest month of performance since the turnaround commenced’.
The shares, which dropped close to 5% yesterday on fears of further turmoil in US regional banks, rebounded 1.4% to 99p.
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