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Lloyds Banking Group PLC - Stock Quote LLOY

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Morningstar's Lloyds Banking Group PLC Stock Analysis

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Lloyds Beats Expectations as Higher Interest Rates Flow Through

Niklas Kammer, CFA Equity Analyst

Analyst Note

| Niklas Kammer, CFA |

Narrow-moat Lloyds reported a good first quarter with underlying profits before impairment of GBP 1,962 million, 14% ahead of the consensus estimate collected by the group itself prior to its earnings release. Net income generation was strong in the quarter with net interest income as well as other income up 10% and 11% respectively. We anticipated that Lloyds should fare well in a higher interest-rate environment, but incorrectly expected benefits to materialize at a slower pace. The banking net interest margin, or NIM, increased to 268 basis points in the quarter from 254 basis points at the end of last year. This was ahead of the 262-basis-point consensus estimate, but also beat Lloyds’ previous full-year guidance of above 260 basis points. Lloyds now expects its NIM for the full year to come in above 270 basis points. The flip side of higher interest rates and margins is a normalization of loan losses from reversals over the past quarters and also heightened uncertainty around asset quality as rates move up. That said, we believe Lloyds will be a net beneficiary of the rate hike cycle. We maintain our GBX 68.00 per-share fair value estimate.

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Lloyds Banking Group PLC's Company Profile

Business Description

Lloyds Banking Group PLC is a retail and commercial bank headquartered in the United Kingdom. The bank operates via three business segments: retail, commercial banking, and insurance and wealth. In retail, Lloyds offers primarily mortgages (66% of loan portfolio), credit cards, and current accounts to its customers. Its commercial banking operation provides lending, transaction banking, working capital management, and debt capital market services to large corporates and financial institutions in the U.K. Insurance and wealth rounds out the product lineup with life and property insurance as well as pension solutions and high-net-worth asset-management services.

25 Gresham Street
London, EC2V 7HN, United Kingdom
T +44 2073562104
Sector Financial Services
Industry Banks - Regional
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type
Employees 57,955

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