Lloyds Banking Group almost doubled pre-tax profits in the fourth quarter of 2022 as rising interest rates boosted the lender’s bottom line, but provisions for defaults in the year ahead came in above expectations.
Lloyds, which also said it would buy back £2bn of shares, posted profits before tax of £1.8bn in the fourth quarter, up 80 cent year on year. Revenues rose more than 20 per cent to £5bn, beating analysts’ expectations of £4.7bn.
The improvement on last year’s results was driven by rising net interest income, thanks to rate increases from the Bank of England. Earlier this month, the UK’s central bank increased the interest rate to a 15-year high of 4 per cent.
Charlie Nunn, chief executive, said that “while the operating environment has changed significantly over the last year, the group has delivered a robust financial performance”.
Lloyds’ net interest margin, the difference between the interest it receives on its loans and the rate it pays for deposits, increased by 65 basis points year on year to 3.22 per cent in the fourth quarter.
But provisions for bad loans in the fourth quarter came in at £465mn, above analyst estimates of £380mn. In the same quarter in 2021, the bank released £532mn of provisions for Covid-related defaults. The lender said it was seeing “very modest evidence of deterioration” in its credit book.
