By Lawrence White
LONDON (Reuters) -Lloyds Banking Group reported an estimate-beating 5% increase in first-half profit on Thursday, driven by higher income from mortgages and unsecured consumer lending, but said corporate defaults rose in one sector.
The British lender said that statutory profit before tax for the first six months of the year was 3.5 billion pounds ($4.75 billion), above a forecast of 3.2 billion pounds.
The bank also said it would pay an interim ordinary dividend of 1.22 pence per share, equivalent to 731 million pounds, up 15% on the prior year.
Lloyds shares rose 1.5% in early trading, outperforming a 0.3% gain in the benchmark FTSE 100 index.
The strong performance update from Britain’s biggest mortgage lender showed that it grew income and managed costs, even as storm clouds gather over the UK economy.
Lloyds maintained its performance targets for the year, as improved house price expectations helped offset a decline in its economic outlook, including higher predicted unemployment.
The lender took an impairment charge of 442 million pounds in the first half, up from 101 million the year before, which it said included a small number of companies in one sector.
That was the fibre broadband sector, Chief Financial Officer William Chalmers told reporters on a conference call, where higher construction costs and lower subscriber numbers have hit some providers hard.
Overall, impairments were down quarter-on-quarter and not a major concern, Chalmers said, with the negative comparison to the first six months of last year due to a one-off credit in that period.
“The impairments picture as a whole is looking extremely benign off the back of retail and commercial performance,” he said.
The bank’s performance could be overshadowed in the coming days by the outcome of a landmark Supreme Court ruling on a probe into Britain’s motor finance sector.
Lloyds is among the lenders most exposed to an adverse ruling on the cases about how banks disclosed historical commissions paid on car finance deals, which analysts have said could cost the banking industry up to 30 billion pounds.
Conversely, a favourable ruling that banks were not culpable would remove a significant source of uncertainty for Lloyds.
Fleet growth and higher average vehicle rental values boosted revenue from motor finance, driving total income for the bank for the half-year to 9.4 billion pounds, an increase of 6% from the same period in 2024.
($1 = 0.7368 pounds)
(Reporting By Lawrence White; Editing by Tommy Reggiori Wilkes and Rachna Uppal)
