Lloyds warns of higher loan defaults amid cost of living crisis
Lloyds Banking Group has raised concerns over the “uncertain” outlook for the UK economy amid soaring inflation, warning that the cost of living crisis could result in higher defaults on its loans.
It came as the bank reported a 14% drop in first quarter pre-tax profit to £1.6bn from £1.9bn a year earlier, although that was better than the £1.4bn that analysts had expected.
The dip was the result of a £177m charge meant to protect the bank from potential defaults linked to the inflation squeezing UK household finances, which hit 7% last month and is making it harder for borrowers to keep up with payments.
It marks a reversal from 2021, when Lloyds released £360m of the cash originally put aside for defaults linked to the Covid crisis, thanks to government support programmes that made it less likely that customers would fall behind on their debts.
Lloyds, the country’s largest mortgage lender and considered a bellwether for the UK economy, said that while it did not have direct exposure to Russia, the war in Ukraine was affecting customers through higher energy and commodity prices, as well as supply chain disruption.
Its chief executive, Charlie Nunn, said the bank was reaching out to customers who may be struggling as a result of the cost of living crisis. “Whilst we are seeing continued recovery from the coronavirus pandemic, the outlook for the UK economy remains uncertain, particularly with regards to the persistency and impact of higher inflation,” he said.
“We are proactively contacting customers where we feel they may need assistance and will continue to help with financial health checks and other means of support. We encourage customers, where affected, to get advice early and talk to us,” Nunn added.
The lender said it
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