Business Context and Reporting Period
Company: Lloyds Banking Group plc
Filing Type: Form 6-K (Interim Management Statement)
Reporting Period: Three months ended 31 March 2026 (Q1 2026)
Announcement Date: 29 April 2026
The Group reported sustained financial strength, delivering higher income, maintained cost discipline, and strong profitability. Management highlighted resilience in the current economic environment and reiterated guidance for the full year 2026.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 | Q4 2025 |
|---|---|---|---|
| Statutory Profit Before Tax | £2.025 billion | £1.517 billion | £1.983 billion |
| Statutory Profit After Tax | £1.555 billion | £1.134 billion | £1.435 billion |
| Underlying Profit | £2.005 billion | £1.532 billion | £1.926 billion |
| Earnings Per Share (Basic) | 2.4p | 1.7p | 2.2p |
| Underlying Net Interest Income | £3.569 billion | £3.294 billion | £3.529 billion |
| Banking Net Interest Margin | 3.17% | 3.03% | 3.10% |
| Operating Costs | £2.474 billion | £2.550 billion | £2.585 billion |
| Cost:Income Ratio | 51.9% | 58.1% | 55.7% |
| Underlying Impairment Charge | £295 million | £309 million | £177 million |
| Asset Quality Ratio | 25 bps | 27 bps | 14 bps |
| Return on Tangible Equity (ROTE) | 17.0% | 12.6% | 15.7% |
| CET1 Ratio | 13.4% | 13.5% | 14.0% |
| Risk-Weighted Assets | £240.8 billion | £230.1 billion | £235.5 billion |
| Liquidity Coverage Ratio | 144% | 145% | 145% |
Material Changes vs. Prior Period
- Profitability Surge: Statutory profit before tax increased 33% year-on-year to £2.025 billion, driven by higher total income and controlled costs. Underlying profit rose 31% to £2.005 billion.
- Income Growth: Underlying net interest income grew 8% year-on-year to £3.569 billion, supported by a 14 basis point increase in the banking net interest margin to 3.17%. Underlying other income increased 11% to £1.605 billion.
- Cost Efficiency: Operating costs decreased 3% year-on-year to £2.474 billion, aided by cost savings and lower severance expenses, despite inflationary pressures and the integration of Lloyds Wealth (Schroders Personal Wealth).
- Balance Sheet Expansion: Underlying loans and advances to customers grew 4% year-on-year to £486.2 billion, with growth in Retail (£3.5 billion) and Commercial Banking (£2.8 billion). Customer deposits decreased slightly by 0.1% to £495.9 billion.
- Impairment Dynamics: The underlying impairment charge was £295 million, slightly lower than the prior year but higher than Q4 2025. This included a £101 million net charge from updated multiple economic scenarios (MES) reflecting a deteriorated outlook due to the Middle East conflict.
Guidance, Outlook, and Risks
2026 Guidance Reiteration
- Underlying Net Interest Income: Expected to be greater than £14.9 billion.
- Cost:Income Ratio: Expected to be less than 50% (operating costs less than £9.9 billion).
- Asset Quality Ratio: Expected to be approximately 25 basis points.
- Return on Tangible Equity: Expected to be greater than 16%.
- Capital Generation: Expected to be greater than 200 basis points.
- CET1 Ratio Target: Intends to pay down to a CET1 ratio of approximately 13.0% by the end of 2026.
Management Commentary and Risks
- Economic Outlook: The base case scenario has been updated to reflect stagflationary consequences, including reduced GDP expansion, rising unemployment, and delayed UK Bank Rate cuts until 2027 due to energy price increases and the Middle East conflict.
- Structural Hedge: The Group expects structural hedge earnings to exceed £7.0 billion in 2026 and £8.0 billion in 2027.
- Regulatory Uncertainty: Retail secured CRD IV models remain under PRA review. Basel 3.1 implementation in 2027 is expected to reduce risk-weighted assets by £6-8 billion.
- Remediation: A £11 million remediation charge was recognized for pre-existing rectification programmes. Uncertainties remain regarding the motor finance commission redress scheme.
Investor Verification Checklist
- Impairment Sensitivity: Verify the impact of the £101 million MES charge and the specific assumptions regarding the Middle East conflict on future credit losses.
- Cost Trajectory: Monitor the integration costs of Lloyds Wealth (Schroders Personal Wealth) and inflationary pressures to ensure the <50% cost:income ratio target remains achievable.
- Capital Return: Confirm the execution of the share buyback (c.0.6 billion shares repurchased in Q1) and the timeline for paying down the CET1 ratio to the 13.0% target.
- Motor Finance Exposure: Review the £389 million operating lease depreciation and the effectiveness of risk mitigation actions against used car price declines.
- Regulatory Capital Models: Track the approval status of Retail secured CRD IV models and the final impact of Basel 3.1 on risk-weighted assets.