Lloyds bank profit drops as interest rates rise 

Lloyds Bank says higher interest rates and cost of living crisis are ‘proving challenging’ for people and companies.

Profits for Lloyds Banking Group fell 29% in the three months to June as it prepared for a rise in consumers falling behind on costly loan and mortgage payments because of increasing interest rates.

Lloyds Bank, which is the UK’s biggest mortgage lender and owns Halifax, said pre-tax earnings dropped to £1.6bn in the second quarter. That marked a decline from £2.3bn a year before and was slower than average analyst estimates for £1.7bn.

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While the bank’s net interest revenue – which accounts for the difference between what is set for loans and mortgages and what is paid out for savers – was essentially flat at £3.5bn, the bank’s earnings were hit by its forecasts for the British economy.

The lender said that although its economists predicted more robust GDP growth than six months back, that was offset by worries that higher interest rates would lead to increased losses. It set aside £419m to ease the blow of any defaults, where mortgage or loan borrowers tumble behind, or potentially default, on their payments.

However, Lloyds felt a bellwether for the UK economy, saying its “asset quality remains resilient, and the portfolio is well positioned in the context of cost of living pressures”.