Lloyds in the spotlight over Brexit uncertainty

Bank of Scotland and Scottish Widows owner Lloyds is this week expected to report first-quarter profits edged up but the focus of analysts will be more on whether Brexit-fuelled uncertainty is now starting to impact on its business.

Bank of Scotland owner Lloyds is expected to report an increase in Q1 profits.

At the firm’s full-year results in February, the group shrugged off concerns about the impact of Britain’s EU departure on the bank as it unveiled an increase in annual profits and delivered a bumper pay-out for shareholders.

City analysts forecast the bank will post pre-tax profits of £2.05 billion in the first quarter, up slightly from the £2bn recorded in the same period last year.

But a warning from rival RBS last week about the impact it was seeing on its business from the uncertain backdrop will inevitably see questions asked over recent trading at Lloyds, which is the biggest bank on the British high street and the country’s biggest mortgage lender,

Michael Hewson, chief market analyst at CMC Markets, said although the bank was in a “fairly healthy state”, its biggest problem is likely to be the slowdown in the UK economy.

“Watch out for further provisions on its MBNA credit card portfolio as well as a change of outlook given that this year’s outlook was predicated on ‘a deal and smooth Brexit transition’,” he said.

Nicholas Hyett, at Hargreaves Lansdown, said he’ll also be watching for any sign of a rise in bad loan impairments.

“UK employment and wages have held up fairly well so far, but increased credit card and car finance activity means a downturn would hit Lloyds’ books pretty quickly,” he said.