Bank says higher interest rates and cost of living pressures are ‘proving challenging’ for people and firms
A branch of Lloyds bank
Lloyds Banking Group’s pre-tax profits fell to £1.6bn in the second quarter. Photograph: Tom Nicholson/Reuters
Lloyds Banking Group’s pre-tax profits fell to £1.6bn in the second quarter. Photograph: Tom Nicholson/Reuters
Lloyds Banking GroupLloyds profits fall as it prepares for mortgage arrears jump amid rising rates

Bank says higher interest rates and cost of living pressures are ‘proving challenging’ for people and firms

@kalyeenaWed 26 Jul 2023 04.22 EDTFirst published on Wed 26 Jul 2023 03.23 EDT

Profits for Lloyds Banking Group tumbled 29% in the three months to June, as it prepared for an increase in customers falling behind on costly loan and mortgage payments because of rising interest rates.

Lloyds, which is the UK’s largest mortgage lender and owns Halifax, said pre-tax profits fell to £1.6bn in the second quarter. That marked a drop from £2.3bn a year earlier, and was slightly slower than average analyst estimates for £1.7bn.

While the bank’s net interest income – which accounts for the difference between what is charged for loans and mortgages and what is paid out for savers – was broadly flat at £3.5bn, the bank’s profits were hit by its predictions for the British economy.

The lender said that although its own economists were expecting stronger GDP growth compared with six months ago, that was offset by fears that higher interest rates would lead to increased losses. It put aside £419m to cushion the blow of any defaults, where mortgage or loan borrowers fall behind, or potentially default, on their payments.

However, Lloyds, which is considered a bellwether for the UK economy, said its “asset quality remains resilient and the portfolio is well positioned in the context of cost of living pressures”.

Mortgage payments for some homeowners, who are already being squeezed by food and fuel costs and have had to renew their mortgages, have soared after 13 consecutive interest rate rises by the Bank of England, where policymakers have been trying to get rising inflation under control.

Lloyds’ chief executive, Charlie Nunn, said: “We know that rising interest rates, cost of living pressures and an uncertain economic outlook are proving challenging for many people and businesses.”

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However, he said the bank, which “delivered a robust financial performance in the first half of the year”, was “fully focused on proactively supporting our customers and helping them navigate the current environment”.

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