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Lloyds Banking Group PLC on Wednesday raised its annual guidance against a backdrop of rising UK interest rates.
Shares in Lloyds were up 3.8% at 45.14 pence in London in early trade, placing it amongst the top performers in the FTSE 100 in opening dealings.
For the six months to June 30, net income was £8.45 billion, up 11% from £7.56 billion a year before, but pretax profit fell 6.4% to £3.66 billion from £3.91 billion.
Net interest income in the half jumped 65% to £7.20 billion from £4.37 billion year-on-year.
Lloyds said it set aside £377 million to cover a possible increase in loan defaults as UK interest rates rise to combat rampant inflation, reversing a release of £734 million a year before.
Underlying profit before the impairment was up 34% to £4.12 billion in the first half, driven by strong net income growth.
Lloyds's CET1 ratio - a key measure of a bank's financial strength - stood at 14.7% on June 30, down from 16.7% at the same time last year but ahead of its ongoing target of 12.5% plus a management buffer of 1%.
Turning to returns, Lloyds declared a 0.80p interim dividend, up 20% from last year and worth £550 million in total.
Looking ahead, Lloyds said it is ‘enhancing’ its guidance due to a strong performance in the first half.
Lloyds said its banking net interest margin is now expected to be greater than 280 basis points. It was 2.77% in the first half, up from 2.50% a year before. In April, it had raised this guidance to above 270 basis points, versus guidance of 260 basis points previously.
Lloyds said its return on tangible equity is now seen at 13% in 2022. It was 13.2% in the first half, down from 19.2% a year ago. Previous guidance stood at greater than 11%.
‘Our strong financial performance demonstrates the resilience of our business model and customer relationships, and has enabled us to enhance guidance for 2022. Just as we remain well placed to withstand the current macroeconomic uncertainty and continue to generate significant capital for our shareholders, so too do we remain committed to maintaining the support we give to our customers every day as they adapt to the challenges they face,’ said Chief Executive Charlie Nunn.
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