Interactive Investor

ii view: Lloyds Bank chiefs full of cautious optimism

9th May 2022 11:27

Keith Bowman from interactive investor

Investing in strategic priorities and with an estimated future dividend yield of over 5%. Buy, sell, or hold? 

First-quarter results to 31 March

  • Net income up 12% to £4.11 billion
  • Pre-tax profit down 14% to £1.62 billion
  • Underlying profit before impairment up 26% to £1.96 billion
  • Cost/income ratio down to 52.3% from 57.3% 

Chief executive Charlie Nunn said:

"In the first three months of 2022, we delivered solid financial performance, with strong income growth and capital build. These results demonstrate the consistent strength of our business model.

“Whilst we are seeing continued recovery from the coronavirus pandemic, the outlook for the UK economy remains uncertain, particularly with regards to the persistency and impact of higher inflation. We are proactively contacting customers where we feel they may need assistance and will continue to help with financial health checks and other means of support. We encourage customers, where affected, to get advice early and talk to us."

ii round-up:

Built on the 2009 acquisition of HBOS, the new Lloyds Banking Group (LSE:LLOY) is home to household brand names including Lloyds Bank itself, Halifax, Bank of Scotland, Scottish Widows and MBNA credit card.  

It operates through the three core divisions of Retail, Commercial Banking and Insurance and Wealth.

For a round-up of these latest results, please click here.

ii view:

Lloyds employs over 55,000 people, servicing around 26 million customers across 14 different brand names. Following business sales made in the wake of the 2008 financial crisis, it is now focused on UK banking and insurance.  Under relatively new chief executive Charlie Nunn, the bank’s strategic push now include a focus on digital channels, supporting the transition to a low carbon economy, deepening its consumer relationships, and broadening its intermediary propositions in product areas such as motor finance and home Insurance.

For investors, the return to a bad-debt provision in this latest quarter is a reminder of the increasingly uncertain UK economic outlook. Lending exposure to companies hit by higher energy and commodity prices cannot be ignored, while a cost-of-living crisis for its retail customers may also see more restrained mortgage and loan applications as higher living costs and below inflation wage rises bite.  

On the upside, lending activity has remained robust to date, interest rate rises have helped push net income higher, while investment in initiatives including a focus on its digital offering are now being made under reinvigorated strategic objectives by a new leader. An estimated future yield of over 5% also remains attractive in an environment of low if rising interest rates. On balance, and with the consensus analyst estimate of fair value standing at 60p per share, scope for longer term optimism appears to persist.   


  • Strong focus on costs
  • Attractive dividend (not guaranteed) 


  • Uncertain economic outlook
  • Lacks the business diversity of some other banks

The average rating of stock market analysts:


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