Lloyds Banking Group Plc (LYG,LLOY.L) Tuesday reported a sharp increase in profit before tax for the first quarter, reflecting a significant rise in net trading income and lower loan impairment charges. The British banking major also expects further reduction in total costs in full-year 2013. The shares are up about 5 percent in the morning trading on the London Stock Exchange.
The company said it is on track to meet 2013 guidance, including a Group net interest margin of around 1.98 percent, and for a substantially reduced impairment charge. The firm now expects total costs to be around 9.6 billion pounds in 2013, down from the previous guidance of 9.8 billion pounds.
Lloyds projects costs to be about 9.15 billion pounds for full-year 2014, nearly 1 billion pounds more than its original strategic review target.
António Horta-Osório, Group chief executive stated, "Underlying and statutory profits improved significantly, and our core loan book returned to growth earlier than expected. Margin increased, and costs and impairments continued to fall rapidly, with this progress underpinned by a further strengthening of our balance sheet."
In the first quarter, the company's statutory profit before tax surged to 2.04 billion pounds from 280 million pounds in the previous year. Underlying profit before tax jumped to 1.48 billion pounds from 497 million pounds in the prior year quarter.
The company attributed the increase in profit mainly to higher income, which includes the gain of 394 million pounds related to the sale of shares in St. James's Place, continued improvements in cost efficiency and a further substantial reduction in impairment charges.
Profit attributable to equity shareholders was 1.53 billion pounds, compared to a loss of 5 million pounds in the prior year. On a per share basis, earnings were 2.2 pence, compared breakeven in the year-ago quarter.
Net interest income fell to 457 million pounds from 1.29 billion pounds last year. Meanwhile, total income climbed to 18.07 billion pounds from 11.88 billion pounds in the preceding year. Net trading income was 12.89 billion pounds, sharply higher than 6.72 billion pounds in the prior year.
Impairment charges dropped to 859 million pounds from 1.46 billion pounds a year earlier.
Banking net interest margin was 1.96 percent, compared to 1.95 percent last year. Core net interest margin improved 2 basis points to 2.34 percent.
The bank's Core tier 1 capital ratio was 12.5 percent, up from 12 in the previous year.
LLOY.L is currently trading at 55.76 pence, up 2.26 pence or 4.22 percent, on a volume of 148.34 million shares.
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