UK markets open in 3 hours 14 minutes
  • NIKKEI 225

    27,767.07
    -232.89 (-0.83%)
     
  • HANG SENG

    19,600.96
    -402.48 (-2.01%)
     
  • CRUDE OIL

    90.16
    -0.34 (-0.38%)
     
  • GOLD FUTURES

    1,792.40
    -1.60 (-0.09%)
     
  • DOW

    32,774.41
    -58.09 (-0.18%)
     
  • BTC-GBP

    18,956.41
    -862.45 (-4.35%)
     
  • CMC Crypto 200

    531.40
    -25.95 (-4.66%)
     
  • ^IXIC

    12,493.93
    -150.57 (-1.19%)
     
  • ^FTAS

    4,129.39
    -3.43 (-0.08%)
     

Lloyds profits fall as it sets aside £377m for loan defaults over living costs

  • Oops!
    Something went wrong.
    Please try again later.
·3-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
Lloyds Banking Group has seen its customers ditch 2.2 million subscription services since last summer in the face of soaring inflation as it posted a fall in half-year profits (Stefan Rousseau/PA) (PA Wire)
Lloyds Banking Group has seen its customers ditch 2.2 million subscription services since last summer in the face of soaring inflation as it posted a fall in half-year profits (Stefan Rousseau/PA) (PA Wire)

Lloyds Banking Group revealed that customers have ditched 2.2 million subscription services since last summer in the face of soaring inflation as it posted a fall in half-year profits and higher loan default provisions.

The high street lending giant said it is seeing increasing signs that customers are battening down the hatches amid the cost-of-living crisis, building up savings for a financial buffer and axing non-essential subscriptions.

Chief executive Charlie Nunn said that while most of its customers are able to tighten spending ahead of this winter’s eye-watering energy bill increases, around 1% are already “struggling to make ends meet”.

But the group said it has yet to see a rise in borrowers falling behind with repayments, despite the inflation pressures.

It reported a 6% fall in half-year profits to £3.7 billion after setting aside £377 million amid the rising cost of living and an increasingly uncertain economic outlook.

The group said £95 million of its half-year impairment charge was due to a weaker economic backdrop in the UK as soaring inflation affects consumer spending.

But the profit haul was better than the £3.2 billion expected in the market and, on an underlying basis, Lloyds saw profits rise 34% to £4.1 billion in the first six months of 2022.

Despite the wider economic woes, the bank raised its full-year outlook across performance measures, including its net interest margin, helping shares in the group lift 4% on Wednesday morning.

Mr Nunn said: “While the world has changed significantly since February, our strategic focus remains clear and disciplined.

“Our strong financial performance demonstrates the resilience of our business model and customer relationships, and has enabled us to enhance guidance for 2022.

“Just as we remain well-placed to withstand the current macroeconomic uncertainty and continue to generate significant capital for our shareholders, so too do we remain committed to maintaining the support we give to our customers every day as they adapt to the challenges they face.”

The group is expecting the UK economy to slow but remain relatively flat, predicting growth of 0.5% next year, while interest rates are forecast to reach 2.25% in the first half of 2023, which will see mortgage demand wane and house prices ease off.

But Lloyds bosses believe a resilient UK jobs market will shield the economy from the worst of the cost crisis.

Mr Nunn said: “Our unemployment expectations remain relatively low – that’s absolutely key.”

He said around 20% of the bank’s customers are slashing spending in areas such as big ticket items and white goods.

Analysis of its customer data reveals that the average family spent £89 per month more in June on energy, food and fuel than in the same month in 2019 – with energy costs accounting for £49 of that extra spend.

Lloyds said inflation for many of its financially vulnerable customers has already hit levels of 12% to 14%, given that the bulk of their spending is already on the essentials that have seen prices jump higher.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting