Profits at Lloyds Banking Group have fallen as the high street bank set aside more money than expected to deal with possible bad debts arising from Donald Trump’s trade war.
The group, whose brands include Lloyds Bank, Halifax and Bank of Scotland, reported a 4% increase in net income to £4.39bn compared with the same period last year, but its pre-tax profit slipped by 7% to £1.52bn, mainly due to higher costs and impairment charges.
Lloyds has now set aside £309m on its balance sheet to account for possible bad debts, compared with previous guidance of £274m. The higher figure included a £35m net charge to prepare for the possible impact on the economic outlook from the US president’s tariffs.
William Chalmers, chief financial officer at the bank, said its direct exposure to the US was “very limited” but that it remained “vigilant” for any potential impact within the UK.
The bank also reported its busiest day ever for mortgage lending in March, as thousands of first-time buyers rushed to beat stamp duty in England and Northern Ireland rising back to its pre-2022 levels in April.
Lloyds said its mortgage balances grew by nearly £5bn in the three months to the end of March. It lent to 20,000 first-time buyers in that period, including a record 5,000 homebuyers who completed in a single day on Thursday 27 March. Overall completions in March rose by 50%, the bank said.
The stamp duty change came into effect on 1 April. First-time buyers now have to pay tax on homes worth more than £300,000, down from £425,000, and the threshold for a reduced rate for first-time buyers has dropped from £625,000 to £500,000.
The zero tax stamp duty threshold that applies to all housing in England and Northern Ireland has also fallen from £250,000 to £125,000. The bank now expects house prices will grow by 2.9% this year.
Lloyds’ net interest margin, which measures the difference between the interest it earns from its loans and the rate it pays out to its customer deposits, rose from 2.97% in the previous quarter to 3.03%.
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The bank, which is also the biggest provider of car loans in the country, did not outline any further provisions for motor finance. In February, it announced it was putting aside £700m for potential compensation over the car loan commission scandal.
A supreme court ruling on which customers should be compensated is expected in July.
