LONDON – Lloyds Banking Group PLC said Thursday its net profit increased in the first quarter of the year as the British economy continued to hold up after the Brexit vote, in the latest sign of the U.K. lender's return to health.
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The U.K. retail bank said revenue increased 1% to GBP4.38 billion ($5.63 billion) in the first three months of the year. This fed into a jump in net profit to GBP766 million, compared with GBP405 million a year earlier, bolstered by a fall in bad loans. Operating costs fell 1%, and the bank raised a closely watched profitability target.
Shares in the lender rose 3% in Thursday morning trading.
The results mark another step forward for Lloyds, whose earnings have for years been drained by costs related to conduct issues and a huge restructuring following its 2009 government bailout.
The bank said earlier this month that it was putting aside GBP350 million in extra provisions to cover future payouts to customers sold insurance products they didn't need. The provision came after a U.K. regulator extended a deadline for claims until August 2019. The bank also put aside GBP100 million to compensate customers who were victims of a fraud committed at the bank more than a decade ago. Two former employees were jailed earlier this year over the fraud.
Lloyds, which is viewed as a bellwether for the U.K. economy, said asset quality remained strong in the country. However, the bank said it didn't expect the Bank of England to raise interest rates this year as the economic boost caused by the fall in value of the pound fades. "U.K. economic performance remains strong," said Chief Executive António Horta-Osório, who played down fears of a bubble in unsecured debt levels.
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The bank increased its projected net interest margin, the difference between what it pays for deposits and charges customers for loans, to 2.8%.
The U.K. government, which owns just under 2% in the bank, is expected to sell its remaining shares in the coming months, marking a fresh start for the lender, which was bailed out during the financial crisis.
The bank is entering the last stretch of a three-year turnaround plan. Investors expect Mr. Horta-Osório to present a new plan for the bank later this year.
Write to Max Colchester at email@example.com
(END) Dow Jones Newswires
April 27, 2017 03:55 ET (07:55 GMT)