Lloyds profits fall as it prepares for mortgage arrears jump amid rising rates

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Profits for Lloyds Banking Group tumbled 29% in the three months to June, as it prepared for an increase in customers falling behind on costly loan and mortgage payments because of rising interest rates.

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26 Jul 2023

Lloyds, which is UK’s largest mortgage lender and owns Halifax, said pre-tax profits fell to £1.6bn in the second quarter. That marked a drop from £2.3bn a year earlier, and was slightly slower than average analyst estimates for £1.7bn.

While the bank’s net interest margin – which accounts for the difference between what is charged for loans and mortgages and what is paid out for savers – was broadly flat at £3.5bn, the bank’s profits were hit by its predictions for the British economy.

The lender said that although its own economists were expecting “stronger” GDP growth compared with six months ago, that was offset by fears that higher interest rates would lead to “increased losses”. It put aside £419m to cushion the blow of any defaults, where mortgage or loan borrowers fall behind, or potentially default, on their payments.

However,