UK-based Lloyds Banking Group PLC (GB:LLOY) today reported disappointing H1 profits, mainly hit by the economic slowdown and rising costs. The bank reported a 14% year-over-year decline in its statutory pre-tax profits of £3.3 billion but managed to exceed the consensus estimate of £3.21 billion. Despite the drop in profits, the bank raised its interim dividend by 15% to 1.06p per share as compared to the first half of 2023.
Following the results, Lloyds’ shares were down by almost 2% in the early trading session but later recovered to a gain of 0.17% as of writing.
Lloyds Banking Group is one of the UK’s oldest and largest banks, providing a wide range of financial services.
Insights from Lloyds’ First-Half Performance
In the first half, Lloyds operating costs rose 7% year-over-year to £4.7 billion. The bank’s efforts to maintain cost efficiency were offset by higher inflationary pressures, ongoing strategic investments, and planned severance charges.
The bank’s NIM (net interest margin), a key profit metric, declined 24 basis points from the prior corresponding period to 2.94% in the first half. As a result, net interest income fell 10% to £6.3 billion. For the full year, Lloyds expects its NIM to be more than 2.9%.
Within its Consumer business, loans and advances grew by £2.7 billion during the first half to £452.4 billion, with growth in mortgages and unsecured loans. Meanwhile, customer deposits increased by £3.3 billion to £474.4 billion, driven by Retail deposits.
Analysts’ Reactions
Analyst Max Georgiou from Third Bridge believes that continuing strong performance after H1 earnings will be crucial, as competition in the mortgage market intensifies with the availability of sub-4% mortgages. Georgiou added that Lloyds should focus on maintaining its NIM by enhancing its service offerings to gain customer loyalty.
UK-based financial services firm Hargreaves Lansdown noted that a dip in performance was expected following the exceptional levels achieved in 2023.
Are Lloyds Shares a Good Buy Now?
According to TipRanks’ analyst consensus, LLOY stock has a Moderate Buy rating based on a total of nine recommendations, of which seven are Buy. The Lloyds share price target is 61.16p, which shows a positive change of 2.65% in the share price.
