UK-based Lloyds Banking Group PLC (GB:LLOY) announced its second-quarter and half-year results for 2023 yesterday. The bank’s profits missed analysts’ forecasts by a slight margin. However, it raised its dividend by 15%.
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The bank’s shares were down by 1.6% yesterday after the results announcement. The decline had a ripple effect, leading to weakness in other banking shares.
Lloyds was the first among the top four UK banks to kickstart this Q2 earnings season, with Barclays PLC (GB:BARC) scheduled to report its numbers today. The remaining two, NatWest Group (GB:NWG) and HSBC Holdings (GB:HSBA), are set to report their earnings on July 28 and August 1, respectively.
Lloyds’ Half-Year Results 2023
For the first half, the bank reported pre-tax profits of £3.9 billion, driven by higher interest rates in the economy. Even though the number missed the analysts’ forecast of £4 billion, it was still higher than the £3.1 billion of profits achieved in the corresponding period last year. The profits fell below expectations primarily due to higher-than-anticipated provisions made for non-performing loans. In Q2, provisions for bad loans reached £419 million, surpassing the analysts’ estimated £371 million. This number is around £660 million for the first half.
The bank’s net interest margin (NIM) for the second quarter came in at 3.14%, showing a slight decrease from the 3.22% recorded in the first quarter. The lower NIM is mainly because the bank’s margins were hit in its mortgage business in a process to offset higher rates and provide more benefits to its savings customers. The banks expect this trend to continue for the rest of the year.
Last but not least, the bank raised its interim dividend to 0.92p per share, which is 15% higher than last year.
Is Lloyds Bank a Good Share to Buy?
Analysts had mixed reactions to the latest earnings from Lloyds. J.P. Morgan analyst Raul Sinha believes higher bad loan provisions and reduced loan volumes “would trigger downgrades of Lloyds’ performance for the year.”
Yesterday, analyst Rohith Chandrarajan from Bank of America Securities reiterated his Buy rating on the stock, forecasting an upside of almost 28% in the share price.
According to TipRanks’ analyst consensus, LLOY stock has a Moderate Buy rating based on a total of 13 recommendations, of which eight are Buy.
The average price prediction is 62.08p, which shows a positive change of 37% in the share price.
