LLOYDS BANK doubled its forecast for UK economic growththis year and insisted that consumers remain resilient in the face of gloomypredictions for the jobs market and global political strife.
Britain’s biggest high street bank thinks the economy willgrow by 0.4% this year and by 0.5% next, up from earlier predictions of 0.2%and 0.3%.
While that is, as Lloyds chief financial officer WilliamChalmers admitted, a “pretty modest set of adjustments” they will be welcomedby the government and the Bank of England given the bank’s market power – it isseen as a barometer for the UK economy.
That uplift comes as Lloyds made profit of £4.3 billion forthe first nine months of the year, up 46%.
There is an impairment charge of £849 million which hintsat consumer distress levels, but Chalmers insists customers are managing theirfinances well, moving swiftly to better savings and loans deals when theybecome available.
It claims to save customers £200 a month on average bymoving them to better mortgage rates.
It also admitted, as the owner of the biggest mortgagelender Halifax, that UK house prices are likely to keep falling this year andnext before recovering in 2025
Lloyds’ predictions and figures don’t entirely tally withother reports. The latest figures from the Office for National Statistics indicatethat job vacancies are down, while unemployment and redundancies are up.
That would seem to apply in banking particularly. Yesterday,Lloyds’ arch rival Barclays said it was seeking cost cuts that would seem tomean inevitable job losses, though probably focussed on the investment bankingbusiness Lloyds lacks.
Today a survey from Tink showed that one in four Brits arerelying on credit to cover essential spending and the number of rejected loanapplications are growing as banks grow cautious about wider economicconditions.
Tasha Chouhan, UK Head ofBanking and Lending at Tink, said: “With many traditional credit checksmaking it difficult for people to gain access to loans, those who most needfinancial support are resorting to desperate measures.”
Lloyds’ own profit margins are being squeezed – the netinterest margin is down from 3.18% to 3.08% as customers shop around for betterdeals.
Lloyds shares, one of the most widely held by retailinvestors, remain in the doldrums. The stock is down nearly 30% in the lastfive years. Today it was flat at 40p which values the bank at £25.5 billion.
Richard Hunter, Head of Markets at interactive investor, commented“Lloyds is making a good fist of performing within a difficult environment,with its underlying financial strength underpinning progress. The group hasbacked its full-year guidance, but pockets of doubt remain. As with itscompetitors, there has been a limited exodus as savers chase higher rateselsewhere in an increased interest rate environment.”
Lloyds was a mooted buyer for at least part of Metro Bank,the distressed challenger lender which has seen found an injection of capitalelsewhere.
Lloyds had no comment on that, beyond saying it was glad tosee its competitor survive.
Charlie Nunn, Group Chief Executive, said: “Guidedby our purpose, we remain focused on supporting our customers and helping themnavigate the uncertain economic environment. The Group continues to performwell. Robust financial performance and strong capital generation in the firstnine months of the year was driven by net income growth, cost discipline andresilient asset quality. This performance allows us to reaffirm our 2023guidance.”
