Lloyds Banking Group profits drop 7% amid concerns over Trump tariffs

Profits at Lloyds Banking Group took a hit as the high street bank allocated more funds than anticipated to cover potential bad debts stemming from the economic fallout of Donald Trump’s trade policies. The group, which operates brands such as Lloyds Bank, Halifax, and Bank of Scotland, reported a 4% rise in net income to £4.4bn compared with the same period last year. However, pre-tax profits fell by 7% to £1.5bn due primarily to higher costs and impairment charges.

To address potential risks linked to the trade tariffs, Lloyds set aside £309m on its balance sheet for possible bad debts, surpassing the £274m it had previously predicted. This increase included a £35m net charge as a precautionary measure for the impact on the economic outlook. William Chalmers, Chief Financial Officer at Lloyds, highlighted that the group maintains limited direct exposure to the US market but remains vigilant amid the broader repercussions for the UK economy.

The bank also experienced unprecedented levels of activity in its mortgage lending division. On Thursday, 27 March, it recorded its busiest day ever for mortgage completions as buyers sought to finalise purchases ahead of changes to stamp duty thresholds in England and Northern Ireland. The revised regulations, effective from 1 April, reduced the zero-tax threshold to £125,000 from £250,000 for all homebuyers, and for first-time buyers, the tax-free limit fell to £300,000 from £425,000. During the first quarter of the year, Lloyds lent nearly £5bn in mortgages and assisted 20,000 first-time buyers, including a record-breaking 5,000 completions in a single day.

In addition to its mortgage figures, Lloyds noted an increase in its net interest margin, a measure of the difference between the interest it charges on loans and what it pays on deposits. This rose from 2.97% in the previous quarter to 3.03%, reflecting enhanced income from its lending activities.

Despite these gains, the bank refrained from making further provisions in relation to its motor finance division. Earlier in the year, it set aside £700m for potential compensation claims linked to the car loan commission scandal. A Supreme Court ruling on customer compensation obligations is anticipated in July, which may provide greater clarity on the scale of the issue.

Amid wider industry developments, HSBC has announced that its chair, Mark Tucker, will step down by the end of the year. Tucker, who has led HSBC since 2017, steered the bank through the challenges of the COVID-19 pandemic and oversaw the appointment of their current Chief Executive, Georges Elhedery. The search for Tucker’s successor will be led by senior independent non-executive director Ann Godbehere.