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Investing.com -- Lloyds (LON:LLOY) shares rose Thursday after the bank reported second-quarter profit ahead of expectations, supported by a one-off impairment release and reduced remediation costs.
The banking group posted underlying pre-tax profit of £2.03 billion, 16% above consensus.
The gain was largely due to the reversal of a £100 million energy tariff-related impairment booked in the first quarter, and a drop in remediation costs to £37 million, well below the expected £136 million.
Pre-provision profit reached £2.16 billion, 6% above forecasts, with operating lease depreciation steady quarter-on-quarter at £355 million, £12 million below expectations.
Net interest income was £3.36 billion, in line with forecasts, while the group’s net interest margin edged up 1 basis point to 3.04%.
Excluding a prior quarter benefit from early repayment charges, the underlying increase was 2 basis points. Lloyds reaffirmed full-year net interest income guidance of around £13.5 billion.
Non-interest income rose 9% year-on-year to £1.52 billion, matching estimates. Total (EPA:TTEF) income for the quarter was £4.52 billion, a 3% increase from the previous quarter.
Impairment charges were £133 million, significantly below the £282 million consensus.
Even excluding the £100 million release, the charge was lower than expected. Lloyds maintained full-year impairment guidance at approximately 25 basis points, with the year-to-date figure at 19 basis points.
Operating costs fell 1% to £2.32 billion. Combined with lower remediation, total costs dropped 5% from the prior quarter to £2.36 billion.
Statutory pre-tax profit was £1.99 billion, 18% ahead of expectations. Attributable profit was £1.27 billion, compared to consensus of £1.07 billion.
Balance sheet metrics were in line with forecasts. Loans rose 1% from the first quarter to £471 billion, and deposits increased by the same margin to £493.9 billion.
The Common Equity Tier 1 (CET1) ratio was steady at 13.8%. Tangible net asset value stood at 54.5p, slightly above consensus.
The group declared an interim dividend of 1.22p, 4% above forecast and up 15% year-on-year. If repeated at year-end, the total dividend per share would be 3.66p, above consensus of 3.50p.
Return on tangible equity guidance was reaffirmed at around 13.5% for 2025 and above 15% for 2026. All underlying guidance components were also maintained.
A regulatory decision regarding motor finance remains outstanding. “We still expect that in the coming days. If it goes the wrong way, the Q2 minutiae will be irrelevant,” Jefferies said in a note.