Lloyds Banking Group followed yesterday’s positive numbers from Barclays with a similarly positive half-year update, and shareholders will be hoping the upbeat half-year numbers will nudge the Lloyds share price higher.
The FTSE 100 bank recorded statutory pre-tax profits of £2bn for Q2, elevating profits in the first half to £3.9bn, which is well above expectations. The bank also announced the acquisition of savings and pensions firm Embark Group, for £390m.
The bank also released another £333m from loan loss reserves, on top of the £323m in Q1, taking the total in the first half to £656m. The performance of the underlying business also saw improvements as net interest margin rose to 2.51%. In Q1, Lloyds said they expected NIM to be more than 245 basis points, up from 240 at the end of the previous quarter, so today’s upgrade to 250bps for the rest of the year is very welcome, although it’s still below last year’s 2.59%
Will mortage increase help Lloyds share price?
On the customer side, mortgages saw an increase of £7.5bn to £447.bn in the first half, while deposits also grew to £474.4bn, a rise of £23.7bn.
In terms of the wider economy, the loan book structure saw declines over the quarter in SME and corporate lending, suggesting that while consumers appear to be spending again, businesses are a little bit more reluctant to open the purse strings. Hopefully that will change as infection rates fall further and the economy continues its reopening process.
This is probably where government policy could well play a part, however that would need to assume the government has a clear plan in terms of business policy. Evidence seen thus far would suggest it doesn’t.
Lloyds confirms dividend payment
Lloyds also confirmed it would pay a 0.67p dividend and, although the bank saw a rise in costs, the improvement seen in margins looks set to more than compensate as the bank upgraded its outlook for the year.
It remains to be seen whether this morning's results will give the Lloyds share price a meaningful lift.
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