Lloyds Banking Group has hailed a strong performance as it doubled bottom-line profits in the first three months of the year despite “challenging” trading conditions.
The lender, which is now less than 2 per cent owned by the taxpayer, posted first quarter pre-tax profits of £1.3 billion, up from £654 million a year earlier.
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On an underlying basis, the group – which owns the Bank of Scotland and Halifax brands – saw a more muted 1 per cent rise in profits to £2.08bn.
Chief executive Antonio Horta-Osorio said: “In the first three months of this year we have delivered strong financial performance.”
He added the results show the bank’s “ability to respond to a challenging operating environment”.
The vast profit improvement is helped by the absence of last year’s hefty £790m charge from its controversial move to buy back expensive bonds from investors.
Lloyds has also recently announced an extra £350m to cover mis-sold payment protection insurance (PPI) claims, while earlier this month it put aside £100m to cover compensation for victims of fraud by former HBOS staff.
Horta-Osorio said on unveiling the first quarter results that the group was determined that victims of the fraud would be “fairly, swiftly and appropriately compensated”.
Lloyds said the UK economy was still strong and is expected to continue growing at a similar rate to 2016, at about 2 per cent.
The bank raised its guidance to reflect better-than-expected levels of bad loans on its books, despite fears of rising consumer debt and the impact of Brexit-fuelled inflation on household finances.
Horta-Osorio said underlying consumer borrowing was still less than it was before the financial crisis, with most of the recent growth coming from student loans and car finance.
The group also posted a surprisingly robust net interest margin, in spite of record low interest rates, which has been hammering returns in the retail banking sector in recent years.
The bank is expected to be fully returned to private hands in the coming months, with the UK government stake being cut to below 2 per cent earlier this month.
The government announced last week that it had already recouped all of the £20.3bn of taxpayer cash used to bail out Lloyds at the height of the financial crisis.
Horta-Osorio said it was a “moment of huge pride for all of us at Lloyds that we are able to give all the money back to the government already”.
First-quarter figures showed that the bank’s mortgage lending continued to fall in the first quarter, but it said it is expected to stabilise and end the year in line with 2016.