Lloyds beats forecasts with 21% jump in first-quarter underlying profits

Lloyds Banking Group delivered a bigger-than-expected jump in underlying profits in the first quarter as impairment charges more than halved, with the UK lender lifting its net interest margin (NIM) guidance for the full year.

The company also surprised by saying that there were no further provisions for payment protection insurance (PPI) in the quarter.

Underlying profit totalled £2.18bn in the first three months of 2015, up 21% over the year before and 22% higher than the fourth quarter of 2014. The consensus forecast was for a smaller improvement to just £1.87bn.

Total income increased by 3% to £4.64bn, helped by a 33 basis-point (bp) improvement in the banking NIM to 2.65%.

The group now expected the full-year NIM to exceed original guidance of around 2.55%.

Impairments totalled just £177m in the first quarter, down 59% year-on-year and 3% quarter-on-quarter.

However, including things like asset sales and a £660m loss relating to the sale of TSB, the statutory pre-tax profit for the first quarter was down 11% year-on-year at £1.21bn.

Lloyds was also able to improve its capital position with its common equity tier 1 (CET1) ratio rising 60bp over the quarter to 13.4%.

'We have made a strong start to the next phase of our strategy to become the best bank for customers and shareholders, as we continue to support and benefit from UK economic growth," said chief executive António Horta-Osório.

"I am pleased with the continued improvement in financial strength and performance in the first quarter and expect our plan to deliver sustainable growth and improved returns."

As for PPI, Lloyds said reactive complaint volumes were down 11% over last year though slightly above expectations and marginally higher than the fourth quarter "due to seasonality".