ii view: Lloyds Bank shares rally as strategy update looms

First-quarter results to 31 March

• Net income up 9% to £4.79 billion
• Pre-tax profit up 33% to £2 billion
• Capital cushion, or CET1 ratio of 13.4%, up from 13.2% in late December
• Return on Tangible Equity (ROTE) up 4.4% to 17%
• Ongoing share buyback scheme of £1.75 billion

Guidance:

• Continues to target a full-year Return on Tangible Equity (ROTE) of more than 16%

Chief executive Charlie Nunn said:

"We are building strategic momentum during the final year of our current (five-year) plan, providing innovative ways for our customers to manage their financial needs and achieve their financial aspirations.

“We are confident in our delivery for the year ahead and reiterate our guidance for 2026. We look forward to presenting our new strategy alongside the half-year results."

• Don’t miss the next big IPO: get the latest IPO news and updates straight to your inbox

ii round-up:

Tracing its history back to 1695, Lloyds Banking Group today operates across three divisions.

The Retail division generated most underlying profits during 2025 at 50% via brands including Lloyds, HBOS, Bank of Scotland and Birmingham Midshires.

Commercial Banking, serving businesses of all sizes, came in at 38% of last year’s profits.

Finally, Insurance, Pensions and Investments, and home to brands such as Scottish Widows and Schroders Personal Wealth, accounted for 5% of profits, with equity investments generating most of the 7% balance.

For a round-up of these latest results announced on 29 April, please click here.

ii view:

Delivering financial services across 16 different brand names, Lloyds highlights itself as the UK’s largest digital bank. It has around 21.5 million mobile app users, logging on 6.5 billion times in 2025. App users for the Scottish Widows business rose 75% during 2025 and compared to 2024 to over 750,000.  

Competitors include Barclays, HSBC Holdings, NatWest Group and Paragon Banking Group. The bank’s current three strategy drives are growth and diversification; strengthening cost and capital efficiency; and delivering change focused on technology and data.

For investors, rising energy prices in the wake of the Middle East war could pressure spending for both corporate and retail customers, resulting in additional bad debt provisions. AI and its impact on financial services across the board remains highly difficult to predict. A price-to-net asset value above the three-year average may suggest the shares are not obviously cheap, while the bank’s diversity of geographical region and product offering such as investment banking are not as wide as that seen at rival Barclays.

• L&G, Shell, BP and HSBC head £10bn FTSE 100 dividend payday
• eyeQ: Shell, JP Morgan, Goldman Sachs, Prosus
• Where the experts are taking risk, and holding back

On the upside, management’s goal to enhance efficiency includes a 3% reduction in operating costs this latest quarter, with expanding digital services potentially fuelled and supported by increasing use of AI. A digital app environment likely sees less need for brand diversity going forward, adding to cost saving opportunities and simplification. The use of a so called ‘structural hedge’ now continues to help in mitigating changes in interest rates, while a capital cushion, or CET1 ratio in line with management’s goal offers balance sheet reassurance. Lloyds shares have also attracted support, lifting the price back above 100p to their highest in over a month. Analysts were generally happy with the Q1 results. Morgan Stanley thinks increased net interest income (NII) guidance "still looks conservative" and raised its price target to 125p.

In all, and while risks remain, positivity ahead of a strategy update in July and forecast dividend yield of around 4% will likely maintain interest in this increasingly digital UK bank.

Positives

• Ongoing focus on cost savings
• Attractive dividend (not guaranteed)

Negatives

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

The average rating of stock market analysts:

Buy