Lloyds: Solid But No Major Incremental Positives

Lloyds 1Q24 results don’t appear to give any incremental positives to drive spreads tighter or equity higher, we feel. They’re solid but the beat is largely in economic revisions to loan losses. Credit metrics are solid, too.

• Key credit metrics: CET1 ratio is in line with consensus, loan losses have come in more positively (6bp of loans, estimates were 25-30bp region) but the largest driver here is an assumed more benign economic outlook in forward provisioning. Non-performers are up 10bp from Dec-23 (at 2.3% of loans) but are lower than Sep-23.
• Wider results: Revenues are broadly in line with consensus (albeit -9% y/y), costs are slightly weaker than expected but that loan loss beat means pre-tax is 6% ahead of expectations. Lending is down marginally in the period, driven by mortgages.
• Outlook: FY24 guidance is reaffirmed. This includes a banking NIM of >290bp (consensus is already at 295bp) and most other guidance looks in line with current consensus. Mgmt remains committed to “pay down” the CET1 ratio to 13.5% by Dec-24.

Conf call is 0930 (London time) at: https://web.lumiconnect.com/#/m/193958827