Lloyds share price falls 3% after missing Q1 earnings expectations

Lloyds recorded a 2% rise in after-tax profit to £1.2 billion in its Q1 results, up from £1.17 billion in the same period last year, but shy of analysts’ forecasts of £1.39 billion.

The news sent the bank’s share price falling more than 3% on Thursday morning, falling to £61.80 a share. However, the stock has since recovered much of its losses, with it trading at £63.29 a share, down 0.49% as of 10:20am GMT.

The bank’s performance in light of the current low interest rate environment is relatively strong, with the UK’s largest mortgage lender blaming Brexit uncertainty and its continued impact on the economy for it missing its earnings expectations.

Lloyds Group CEO António Horta-Osório said that, despite its performance, he remains confident in the bank’s business model and strategy to deliver returns for its customers and shareholders.

Lloyds results: key figures

While Brexit uncertainty persists and a lack of clarity likely to further impact the economy, Lloyds resilient performance allowed meant it reaffirmed all its financial targets, with net interest margin remaining strong at around 290 basis points, while operating costs below £8 billion in 2019 and a net asset quality ratio below 30 basis points, Lloyds said in its results.

As a result, Lloyds continues to expect a return on tangible equity of 14% to 15% in 2019 and ongoing capital build of 170 to 200 basis points per annum, the bank added.

Lloyds rate rise hopes dashed until Brexit is resolved

Lloyds has had to come to terms with the prolonged low interest rate environment, with the bank admitting that it doesn’t expect a rise until Brexit is resolved, which won’t happen until after the revised October 31 deadline.

‘Our planning assumption was that we expected a rate rise towards the back end of this year,’ Lloyds CFO George Culmer told reporters. ‘The market is now pushing that out further into next year and beyond ... And I probably think our thoughts would be moving with the market as well.’

The lender saw a mortgage lending fall by £4.9 billion on the previous year amid highly competitive market conditions.

‘Our expectation is by the end of the year we’ll be back in line in terms of balances and we expect to close 2019 with mortgage balances in line with the end of 2018,’ Culmer added.