Earnings at financial services enterprise, Lloyds Banking Group, reportedly bounced back with forecast-beating pre-tax profits of approximately £1.9 billion for Q1. The lender supposedly released money that had been kept aside for potential loan loss triggered by the COVID-19 pandemic.
The positive results came as other Europe-based lenders reported robust quarterly trading.
The financial services group released approximately £459 million from a cash reserve intended to cover bad debts in the initial three months, in clear contrast to the £1.4 billion charge it took at the beginning of the pandemic in 2020. Lloyds Banking Group put aside a total of £4.2 billion in 2020 in fears that business as well as personal consumers might fail to keep up with their loan amounts.
The recent move indicated cautious confidence regarding the economic outlook following the success of the vaccine programme of the UK, which has allowed the government to ease social restrictions after several months of lockdown.
The pre-tax profits for the first three months to March were much ahead of predictions and up substantially from the £74 million recorded for the same period back in 2020, when charges of loan loss almost eliminated earnings.
Outgoing Lloyds Banking Group CEO, António Horta-Osório, however, cautioned that the COVID-19 pandemic still continues to have a very significant impact on communities, businesses, and people across the UK and the globe.
Horta-Osório added that while Lloyds is witnessing positive signs, in particular the progress of the COVID-19 vaccine rollout and gradual removal of lockdown restrictions, the overall outlook remains unpredictable.
The lender further forecasts a slowdown in the house buying bubble, which has resulted in a £6 billion increase in mortgage balances in Q1 and helped balance out low interest rates that hampered revenues, that dropped 7% to £3.7 billion.
Going forward, while the cancellation of the stamp duty holiday this summer is expected to lessen demand, the lender hopes the ‘race for space’; wherein consumers prioritize bigger homes and gardens amid an increase in home working, to continue to fuel mortgage borrowing into the last two quarters of the year.