Lloyds Q1 Net Income Rises 4% to £4.4bn, Lending Up £7.1bn

Strong Financial Performance in Q1 2025

Lloyds Banking Group has delivered a robust financial performance in the first quarter of 2025, reporting a statutory profit after tax of £1.1 billion. This marks a slight decrease from the £1.2 billion achieved in the same period last year but reflects a 4% increase in net income, driven by higher underlying net interest income and other income streams. The Group’s return on tangible equity stood at a healthy 12.6%, underscoring sustained profitability amid a challenging economic backdrop.

Underlying net interest income rose 3% year-on-year to £3.3 billion, supported by a banking net interest margin of 3.03%, up 8 basis points from the prior year. This improvement was fueled by strong deposit volumes and a growing structural hedge contribution, despite ongoing margin compression and deposit churn headwinds.

Lending and Deposits Drive Growth

The Group’s lending book expanded by £7.1 billion during the quarter to £466.2 billion, with UK mortgages leading the charge, growing by £4.8 billion. Growth was also seen across UK retail unsecured loans, credit cards, motor finance, and European retail businesses. Customer deposits increased by £5.0 billion to £487.7 billion, reflecting strong inflows into retail and commercial banking segments. The loan-to-deposit ratio remained stable at 96%, highlighting a balanced funding position.

Cost Discipline Amid Strategic Investment

Operating costs rose 6% to £2.6 billion, influenced by inflationary pressures and front-loaded severance costs related to strategic transformation initiatives. Despite these headwinds, the Group maintained cost discipline, partly offsetting increases through savings and efficiency measures. The cost-to-income ratio improved to 58.1% from 73.7% in the prior quarter, reflecting a return to more normalized operating conditions after last year’s elevated charges.

Resilient Asset Quality and Capital Position

Asset quality remained resilient with an underlying impairment charge of £309 million, translating to an asset quality ratio of 27 basis points. This included a £35 million net charge related to updated economic outlooks, incorporating a £100 million central adjustment for downside risks from recent tariff announcements. The Group’s Common Equity Tier 1 (CET1) capital ratio held steady at 13.5%, supported by capital generation of 27 basis points during the quarter. Risk-weighted assets increased by £5.5 billion, partly due to temporary hedging activity expected to reverse later in the year.

Guidance and Outlook

Reaffirming its 2025 guidance, Lloyds expects underlying net interest income of approximately £13.5 billion, operating costs around £9.7 billion, an asset quality ratio near 25 basis points, and a return on tangible equity of about 13.5%. The Group’s strategic transformation continues to progress, with a focus on innovative customer solutions and sustainable returns. CEO Charlie Nunn emphasized confidence in the outlook despite ongoing market volatility and economic uncertainty, highlighting the Group’s differentiated business model and strong franchise.