Earnings at Lloyds Banking Group have surged back, with a forecast-beating £1.9bn in pre-tax profits for the first quarter, as the lender released hundreds of millions of pounds-worth of loan loss provisions originally earmarked for potential defaults linked to the coronavirus pandemic.
Lloyds released £459m from a cash pile meant to cover bad debts in the first three months of the year, in stark contrast to the £1.4bn charge it took at the start of the outbreak in 2020. The banking group put aside a total of £4.2bn last year, amid fears that business and personal customers would fail to keep up with their loan payments.
The latest move signalled cautious confidence about the economic outlook after the success of the UK’s vaccine programme, which has helped the government ease restrictions after months of lockdown.
Pre-tax profits for the three months to March were up 2,464% from the £74m it reported for the same period last year, when loan loss charges almost wiped out its earnings, significantly ahead of analyst expectations of about £1.1bn.
However, the outgoing chief executive, António Horta-Osório, struck a cautious tone in his final set of results at the lender he has led for a decade. “The coronavirus pandemic continues to have a significant impact on people, businesses and communities in the UK and around the world,” he said. “While we are seeing positive signs, notably the progress of the vaccine rollout and the emergence from lockdown restrictions, the outlook remains uncertain.”
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The Portuguese banker will take over as chairman of Credit Suisse on 1 May, after the Swiss bank puts forward his appointment to shareholders at its annual general meeting on Friday.
He is being replaced by the HSBC banker Charlie Nunn, who will take over at Lloyds on 16 August. The chief financial officer, William Chalmers, will act as chief executive in the interim.
Horta-Osório is leaving after 10 years at the helm, having joined in 2011 and been tasked with bringing the bank back into private hands after its crisis-era takeover of struggling HBOS, and Lloyds’ subsequent £20.3bn government bailout in 2008.
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