Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Morningstar indicators for Lloyds
What we thought about Lloyds’ income
Lloyds Lloy reported a fundamental profit of 1.53 billion GBP in the first quarter of 2025. Increased debt losses this year, driven by an overlay fee of 100 million GBP to cover potential tariff-induced risks, has driven differences in performance compared to last year. However, the 27 basis points loan loss was decent. Last year, the bank booked a reversal of commercial bank units, creating a comparative base that would be difficult. Lloyds continues his guide to the 25 base point loan loss rate that year.
Maintain fair value estimates and narrow moat valuations. Operational performance was decent. Net interest income rose 3% to 32.9 billion Gbp, supported by structural hedges. Considering the market situation, mortgages and deposits growth was good, at 2% and 1%, respectively. Other revenues rose 8% to 1.45 billion Gbp. Developments in the growth of corporate non-profit-related revenue share have changed a step towards performance in the first half of last year, but have been slower since. We hope that Lloyds’ ability to diversify its income streams from interest-dependent mortgage lending will again increase.
Operating expenses increased by 6% to 2.55 billion Gbp, half of which was expected to be retirement benefits and strategic expenses. The operating cost guidance of 9.7 billion GBP over the year was unchanged.
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