Lloyds Banking Group is set to release its third-quarter results on Wednesday. Here is what you should know:
Pretax Profit
The U.K. bank is projected to announce a pretax profit of £1.82 billion ($2.23 billion) for the quarter, based on a consensus of 20 analyst models. This is an increase from the reported £1.51 billion during the same period last year.
Net Income
Lloyds Banking Group is expected to report a net income of £4.56 billion for the three months ending on September 30th, slightly lower than the £4.59 billion recorded in the previous year’s corresponding period. Net interest income is predicted to rise to £3.48 billion, up from £3.39 billion.
Key Points to Watch Out For
Banking Net Interest Margin
The consensus suggests that the banking net interest margin, which represents the difference between earnings from loans and deposits, will be at 3.10% for Q3. This reflects a slight decline compared to the 3.14% margin recorded in the second quarter. However, CMC Markets U.K. warns that any potential improvement in the net interest margin may be countered by rising impairment provisions. Lloyds Banking raised its 2023 guidance to over 3.10% during the half-year results, while the consensus predicts a 3.13% margin for the entire year.
Provisions
The London-listed bank is expected to record a substantial GBP336 million charge for potential bad loans in the current quarter. This would bring the total provisions for the year-to-date to GBP998 million, following the GBP662 million charge reported in the first half of the year.
Lending
Investors will be closely monitoring the bank’s comments on loan demand during the quarter. They will also be interested in figures related to loans and customer deposits, considering recent signs of a slowdown attributed to subdued consumer sentiment and weakness in mortgage approvals.
CET 1 Ratio
According to consensus estimates from analysts, the bank is projected to close the quarter with a common equity Tier 1 (CET 1) ratio of 14.6%, after factoring in dividends and buybacks. This ratio serves as a crucial indicator of balance-sheet strength and represents a slight increase compared to the 14.2% reported three months ago.
Return on Tangible Equity (RoTE)
Lloyds Banking is anticipated to achieve a return on tangible equity (RoTE) of 15.7% for the quarter, marking an improvement from the 13.6% recorded in the preceding quarter. The bank has set a target RoTE of over 14% for the year 2023.
Capital Returns
Currently, there is no prediction of a share buyback or dividend distribution. However, Jefferies anticipates that the bank might announce a GBP500 million buyback program due to its excess capital. It’s worth noting that this would deviate from its usual practice of announcing distributions during its full-year results. Citi analysts suggest that insights on buybacks and the fiscal year 2024 are more likely to be disclosed alongside the full-year figures, expected in February.