Proactive Investors - Lloyds Banking Group PLC (LON:LLOY) wraps up the FTSE 100 bank reporting season this coming Wednesday, with its shares having risen 1.2% in the week running up to the release as investors digest numbers from its peers.
Closest rivals Barclays (LON:BARC) and NatWest (LON:NWG) reported strong figure, with income, margins and profits up.
Ahead of the results, analysts at Citi and UBS made Lloyds their top pick in the sector, suggesting the consensus near-term forecasts for interest income are “too low” and medium-term risks to “overstated”.
Without an investment banking arm to speak of, Lloyds makes all its money from retail and commercial banking.
So it has been key that as the Bank of England has raised interest rates since late 2021, Lloyds’ net interest margin – the profitable gap between rates on loans and savings – has crept up from under 2.5% to 3.22% in the final quarter of last year.
Like many of its peers, the bank’s management warned they expect NIM to drop in the first quarter but remain above 3.05% for 2023.
Citi suggested this was conservative, with the Q1 numbers and outlook commentary to reassure on NIM and the cost of risk.
Loan loss provisions will be worth watching out for, with impairments of £465mln and £668mln in the past two quarters for expected debt defaults.
The analyst consensus is for similar levels over 2023 to what was seen last year.
Analysts are also seeing scope for share buybacks, with Jefferies forecasting £3bn this year.