The group’s results for the first three months of 2021 mark the last set for outgoing chief executive Antonio Horta-Osorio. The profit haul beat market expectations and compares with a profit of just £74 million a year earlier.
On an underlying basis, Lloyds – often seen as a barometer of the UK economy – saw profits jump to £2.1bn from £558m a year ago. It comes as the group revealed a net impairment credit of £323m, having released £459m of provisions set aside for loan losses thanks to greater optimism over the UK’s economic recovery from the pandemic.
Rival HSBC also cut its reserves for loan losses on Tuesday thanks to greater optimism over the UK economy as the vaccination programme rolls out.
Lloyds said it now expects the UK economy to bounce back with 5 per cent growth in 2021, against previous expectations of 3 per cent expansion, while it also believes unemployment will peak at 7 per cent, not 8 per cent.
It has upgrade its outlook for the full year as a result on a range of measures, including its net interest margin, a key performance measure for retail lenders.
Horta-Osorio, who leaves later this month after a decade in the role to become chairman of Swiss bank Credit Suisse, said: “Whilst we are seeing positive signs, notably the progress of the vaccine rollout and the emergence from lockdown restrictions, the outlook remains uncertain.”
He said he leaves with a mixture of “pride and sadness”, but added the “long-run transformation of the group has positioned the business well to address the challenges of the pandemic”.
He will be replaced by Charlie Nunn, the head of HSBC’s high street banking unit, who takes up the post in August.
Richard Hunter, head of markets at Interactive Investor, said: “Lloyds is seeing the benefit of the rising tide of sentiment in the UK and its numbers reflect a recovery play in action.
“This time a year ago as the UK economy was going into freefall, the banks found themselves in the eye of the storm. This latest update from Lloyds encapsulates the improvements that have been seen since, and the release of £459m of bad loan provisions is a strong indication of an improving economic outlook.”
Adam Vettese, analyst at investment platform eToro, added: “This is CEO Antonio Horta-Osorio’s last set of numbers after a decade in charge, and he is leaving the bank in far better shape than he found it.”
Lloyds said it experienced its best month for mortgages since 2008 in March as the housing market enjoyed a bubble spurred on in part by the stamp duty holiday. Its mortgage book increased by 6 per cent year-on-year to £283.3bn.
The group, which also owns Scottish Widows, reiterated that it would “resume its progressive and sustainable ordinary dividend policy with the dividend at a higher level than 2020” and is hopeful that the City regulator will return the policy control to boards for the interim pay-out.