Although the bank’s revenue for the first six months of the year rose 12% to £8.5bn, its pre-tax profits fell 6% to £3.9bn at £3.7 billion.
Profits at Lloyds fell due to rising operating costs and the need to set aside £377m to cover possible bad debts caused by rising inflation and rising interest rates. ‘interest. Last year its profits were boosted by a £734million credit gain due to Covid-19 losses well below expectations.
Despite the cost of living crisis compressing household incomes, Lloyds chief executive Charlie Nunn said most of its customers are proving financially resilient and the bank has not seen an increase in loans.
As a result, the group increased its dividend by 20% to 0.8p per share, a payout of around £550m to shareholders. Moreover, it now expects its net interest margin or profit margin to exceed 2.8%, compared to the previous forecast of 2.7% and 2.54% last year.
Mr. Nunn said: “We delivered a strong financial performance in the first half of 2022 based on improved revenues, increased capex and benign asset quality alongside continued business momentum. Our financial performance in the first half allowed us to improve our guidance for 2022.”
However, given the uncertain economic outlook, Lloyds did not opt for a long-term forecast. “We are confident in the future and are executing well, but it is simply too early to update longer-term numbers,” Mr Nunn said. Lloyds is the UK’s largest mortgage lender and the size of its home loan portfolio increased by 1% to £296.6bn in the first half.
Elsewhere, the Yorkshire Building Society said its pre-tax profit for the first half of the year rose from £147.7million to £243.4million, thanks to strong loan growth. It provided 25,000 new residential mortgages in the first half, with balances rising in the first half by £1.4bn to a record £43.3bn.