By Elena Vardon
Lloyds Banking Group is scheduled to report results for the first quarter of 2024 on Thursday. Here's what you need to know:
PRETAX PROFIT: The U.K. bank is expected to post a pretax profit of 1.66 billion pounds ($2.05 billion) for the quarter, according to a company-compiled consensus based on 14 analyst models. This compares with GBP2.26 billion reported for the same period a year earlier.
NET INCOME: The FTSE 100-listed lender is expected to post net income for the three months ended March 31 of GBP4.32 billion by the same consensus, lower than the GBP4.65 billion it posted in the year-earlier period. Net interest income is seen slipping to GBP3.26 billion against GBP3.535 billion.
Shares in London trade at around 51 pence ahead of the results. Since the start of the year, shares have risen around 7% and recovered from the slump that followed the announcement of the Financial Conduct Authority's review into the motor finance industry in January. The bank is exposed to the investigation through its Black Horse brand and the news resulted in a sell off as investors priced in uncertainty around the review's outcome. The lender since took a GBP450 million provision in fourth-quarter earnings for any potential impacts though analysts expect more charges to be booked after the ruling is finalized in the third quarter.
WHAT TO WATCH
-- Consensus expects banking net interest margin--the difference between what lenders earn on loans and pay out on deposits--to decline further to 2.93% for the first quarter, from 2.98% in the fourth and 3.08% in the third. "The ongoing decline reflects mortgage margin compression and deposit mix change, albeit there is already evidence that these two headwinds are easing," Citi analysts write in a note. Lloyds Banking guided for a 2024 margin of more than 2.90%, while consensus pencils in a 2.93% margin for the year. "The trajectory of NIM will be key, with Lloyds having guided to a 'gentle decline' in 1H24 followed by a 'gentle incline' in 2H24," Barclays analysts say.
-- The London-listed bank's costs will be in focus as the market will compare the print to its operating expenses guidance for 2024 of around GBP9.3 billion, with consensus forecasting a GBP2.255 billion contribution from the first quarter. Investors will watch the impact of the Bank of England's GBP100 million levy from the change in the accounting treatment of supervisory charges which will be added to costs and subtracted from net interest income.
-- Lloyds Banking is expected to close the quarter with a common equity Tier 1 ratio--a key measure of balance-sheet strength--at 13.9% according to consensus, compared with 13.7% three months prior and its target for the year of around 13.5%.
-- The lender's return on tangible equity is expected to be 14.3% for the quarter and 11.3% for the year, which compares with guidance for a 2024 RoTE of around 13%.
-- At this stage of the year, no update is expected on the motor finance redress or on capital returns.
Write to Elena Vardon at elena.vardon@wsj.com
(END) Dow Jones Newswires
April 23, 2024 08:19 ET (12:19 GMT)
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