Core Insights - Lloyds Bank reports that UK business confidence has reached its highest level since 2015 [1] Group 1 - The increase in business confidence is attributed to improved economic conditions and a more stable political environment [1] - Companies are optimistic about future growth prospects, which may lead to increased investment and hiring [1] - The survey indicates that 60% of businesses expect their performance to improve over the next year [1]

Group 1 - The confidence level of UK employers reached a nine-year high in June, with the Lloyds Bank Business Barometer rising to 51%, the highest since November 2015 [1] - The economic optimism index in the survey hit a ten-month high, increasing by one percentage point from the previous month after a significant rise of 16 percentage points in May [1] - 60% of businesses expect to increase their workforce in the next year, indicating preparations for future growth [1] Group 2 - Adzuna reported a slight decrease in job vacancies in May compared to April, but a year-on-year increase of 0.5%, marking the third consecutive month of year-on-year growth after over a year of decline [2] - The CBI noted that while business sentiment has improved compared to May, overall sentiment remains weak due to increased employer tax burdens and geopolitical uncertainties [2] - Businesses are facing higher labor costs, cautious consumer behavior, and rising global uncertainties [2]

Group 1 - Following the ceasefire between Israel and Iran, UK bank stocks experienced a general increase [1] - Barclays, Lloyds, and HSBC saw stock price increases ranging from 2.2% to 3% [1]

Group 1 - The US equity market has experienced a generational run compared to global equities, indicating strong performance in the domestic market [1] - PropNotes focuses on identifying high-yield investment opportunities for individual investors, simplifying complex concepts and providing actionable insights [1] - The analysis produced by PropNotes aims to assist investors in making informed decisions backed by expert research [1]

Investment Rating - The industry view for European banks has been raised to Attractive from In-Line [8][30][31] Core Insights - With risks to European growth receding, there is increased confidence that yield steepening will hold and net interest income (NII) growth will resume in 2026 [1][2][32] - The report estimates a 10% compound annual growth rate (CAGR) for earnings per share (EPS) from 2024 to 2027, which is not currently reflected in the 9x price-to-earnings (P/E) ratio [1][3][30] - The sector is expected to experience a trough in NII in the second half of 2025, followed by a 3-4% growth starting in 2026, with potential upside if loan growth accelerates [3][6][30] Summary by Sections Economic Outlook - Post US-China de-escalation, risks to European growth have diminished, leading to a maintained assumption of 1.5% ECB rates, with expectations of 25-50 basis points higher steepening than previously estimated [2][14][32] Earnings and Valuation - The report indicates that the sector is trading at the lower end of the historical P/E range of 8-13x, despite improved cost efficiency, lower credit risk, and less leverage compared to pre-global financial crisis (GFC) levels [4][30] - The average price targets imply an 18% upside for Euro Area and UK banks, compared to a mere 3% upside for the wider market [5][30] Strategic Recommendations - The report highlights a preference for longer duration/high deposit beta names, with upgrades for AIB and BOI to Equal-weight, and ABN also upgraded to Equal-weight [6][31][37] - Top picks include Commerzbank, Lloyds, Santander, and Soc Gen, reflecting a strategic focus on banks with better growth prospects [6][9][31]

Core Insights - Users reported issues with the Lloyds and Halifax bank websites, indicating potential service disruptions [1] Company Impact - The reported outages may affect customer trust and satisfaction for Lloyds and Halifax banks [1] - Continuous technical issues could lead to increased scrutiny from regulators and impact the banks' operational efficiency [1]

Core Viewpoint - The article compares Lloyds (LYG) and ICICI Bank Limited (IBN) to determine which stock is more attractive to value investors, highlighting the importance of various valuation metrics and Zacks Rank in the analysis [1][3]. Group 1: Zacks Rank and Earnings Outlook - Lloyds currently has a Zacks Rank of 2 (Buy), indicating a positive earnings estimate revision trend, while ICICI Bank has a Zacks Rank of 3 (Hold) [3]. - The improving earnings outlook for Lloyds makes it stand out in the Zacks Rank model, suggesting it may be the superior value option [7]. Group 2: Valuation Metrics - Lloyds has a forward P/E ratio of 11.73, significantly lower than ICICI Bank's forward P/E of 19.36, indicating that Lloyds may be undervalued [5]. - The PEG ratio for Lloyds is 0.96, while ICICI Bank's PEG ratio is 2.08, further suggesting that Lloyds offers better value relative to its expected earnings growth [5]. - Lloyds has a P/B ratio of 0.97 compared to ICICI Bank's P/B of 2.97, reinforcing the notion that Lloyds is more attractively priced based on its book value [6]. - These metrics contribute to Lloyds receiving a Value grade of B, while ICICI Bank has a Value grade of C [6].

Group 1 - Lloyds Banking Group has performed well year-to-date, despite tariff turmoil affecting the broader European financial sector [1] - The shares have returned significantly, indicating strong performance in the market [1] - The investment strategy focuses on a long-term, buy-and-hold approach, particularly in high-quality earnings stocks, often found in the dividend and income section [1] Group 2 - The article expresses a beneficial long position in Lloyds Banking Group shares, indicating confidence in the stock's future performance [2] - The author emphasizes that the opinions presented are personal and not influenced by external compensation [2]

[Q1 2025 Performance Overview](index=2&type=section&id=Q1%202025%20Results) [Financial Highlights and 2025 Guidance](index=2&type=section&id=Sustained%20strength%20in%20financial%20performance) Lloyds Banking Group reported strong Q1 2025 financial performance with £1.1 billion profit after tax and reaffirmed 2025 guidance Q1 2025 Key Performance Indicators | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Statutory Profit After Tax | £1.1bn | £1.2bn | -8.3% | | Net Income | £4.4bn | £4.2bn | +4% | | Underlying Net Interest Income | £3.3bn | £3.2bn | +3% | | Banking Net Interest Margin | 3.03% | 2.95% | +8 bps | | Return on Tangible Equity | 12.6% | 13.3% | -0.7 pp | | Underlying Impairment Charge | £309m | £57m | +442% | | CET1 Ratio | 13.5% | 13.9% | -0.4 pp | Reaffirmed 2025 Full-Year Guidance | Metric | 2025 Guidance | | :--- | :--- | | Underlying Net Interest Income | c.£13.5 billion | | Operating Costs | c.£9.7 billion | | Asset Quality Ratio | c.25 basis points | | Return on Tangible Equity | c.13.5% | | Capital Generation | c.175 basis points | - The Group achieved strong growth in lending and deposits, with underlying loans and advances increasing by **£7.1 billion** and customer deposits by **£5.0 billion** during the quarter[8](index=8&type=chunk) [Underlying Financial Statements Summary](index=3&type=section&id=INCOME%20STATEMENT%20%28UNDERLYING%20BASIS%29A%20AND%20KEY%20BALANCE%20SHEET%20METRICS) Underlying profit decreased 13% year-on-year to £1,532 million, impacted by higher impairment and costs, despite net income growth Q1 2025 Underlying Income Statement vs. Prior Periods (£m) | Metric | Q1 2025 | Q1 2024 | YoY Change | Q4 2024 | QoQ Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Underlying Net Interest Income | 3,294 | 3,184 | +3% | 3,276 | +1% | | Net Income | 4,391 | 4,241 | +4% | 4,378 | 0% | | Operating Costs | (2,550) | (2,402) | +6% | (2,450) | +4% | | Underlying Impairment Charge | (309) | (57) | +442% | (160) | +93% | | Underlying Profit | 1,532 | 1,757 | -13% | 993 | +54% | | Statutory Profit After Tax | 1,134 | 1,215 | -7% | 700 | +62% | Key Ratios and Balance Sheet Metrics | Metric | Q1 2025 | Q1 2024 | Q4 2024 | | :--- | :--- | :--- | :--- | | Banking Net Interest Margin | 3.03% | 2.95% | 2.97% | | Cost:Income Ratio | 58.1% | 57.2% | 73.7% | | Return on Tangible Equity | 12.6% | 13.3% | 7.1% | | Underlying Loans and Advances | £466.2bn | £448.5bn | £459.1bn | | Customer Deposits | £487.7bn | £469.2bn | £482.7bn | | CET1 Ratio | 13.5% | 13.9% | 14.2% | [Quarterly Financial Trends](index=5&type=section&id=QUARTERLY%20INFORMATIONA) Quarterly trends show stable net income, rising costs, increased impairment, and an improving banking net interest margin Key Metrics Trend (Last 5 Quarters) | Metric | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Income (£m) | 4,391 | 4,378 | 4,346 | 4,152 | 4,241 | | Underlying Profit (£m) | 1,532 | 993 | 1,853 | 1,740 | 1,757 | | Banking NIM | 3.03% | 2.97% | 2.95% | 2.93% | 2.95% | | Asset Quality Ratio | 0.27% | 0.14% | 0.15% | 0.05% | 0.06% | | CET1 Ratio | 13.5% | 14.2% | 14.3% | 14.1% | 13.9% | [Detailed Performance and Balance Sheet Review](index=7&type=section&id=REVIEW%20OF%20PERFORMANCEA) [Balance Sheet Analysis](index=7&type=section&id=BALANCE%20SHEET%20ANALYSIS) Balance sheet expanded with total assets at £909.9 billion, driven by growth in loans (£466.2 billion) and deposits Loan and Deposit Portfolio Breakdown (£bn) | Category | 31 Mar 2025 | 31 Dec 2024 | Quarterly Change | | :--- | :--- | :--- | :--- | | **Loans and Advances** | | | | | UK mortgages | 317.1 | 312.3 | +1.5% | | Credit cards | 15.9 | 15.7 | +1.3% | | Corporate & Institutional | 58.5 | 57.9 | +1.0% | | **Total Underlying Loans** | **466.2** | **459.1** | **+1.5%** | | **Deposits** | | | | | Retail current accounts | 102.5 | 101.3 | +1.2% | | Retail savings accounts | 210.1 | 208.2 | +0.9% | | Commercial Banking | 164.9 | 162.6 | +1.4% | | **Total Customer Deposits** | **487.7** | **482.7** | **+1.0%** | [Income Statement Analysis](index=11&type=section&id=Income%20statementA) Net income increased 4% year-on-year to £4,391 million, driven by growth in net interest income and other income - Underlying net interest income (NII) grew **3% YoY** to **£3,294 million**, supported by an improved banking net interest margin of **3.03%** (up **8 bps YoY**) and higher average interest-earning assets[29](index=29&type=chunk) - The sterling structural hedge contributed **£1.2 billion** to total income in Q1 2025, an increase from **£1.0 billion** in Q1 2024. The Group expects the hedge to contribute **£1.2 billion** more in 2025 than in 2024[31](index=31&type=chunk) - Underlying other income increased **8% YoY** to **£1,452 million**, driven by a **16%** rise in Retail (primarily UK Motor Finance) and an **8%** increase in Insurance, Pensions and Investments[32](index=32&type=chunk) - Operating lease depreciation increased to **£355 million** from **£283 million** in Q1 2024, attributed to fleet growth, higher value vehicles, and declines in used electric car prices[33](index=33&type=chunk) [Costs, Asset Quality, and Capital](index=12&type=section&id=REVIEW%20OF%20PERFORMANCE%20%28continued%29) Operating costs rose 6% to £2,550 million, impairment increased, and the CET1 ratio remained strong at 13.5% - Operating costs increased **6% YoY**, driven by inflation and planned higher severance costs front-loaded into Q1. The cost:income ratio was **58.1%**[34](index=34&type=chunk)[36](index=36&type=chunk) - No new remediation charges were recognized in Q1 2025. The Group awaits a Supreme Court judgment in July regarding motor finance commission arrangements, which will inform the FCA's next steps[35](index=35&type=chunk) - The underlying impairment charge was **£309 million** (Asset Quality Ratio of **27 bps**), which included a **£100 million** central adjustment to address downside risks related to potential US tariff policies[37](index=37&type=chunk) - The CET1 ratio was **13.5%**, with **27 basis points** of capital generated during the quarter. Risk-weighted assets (RWAs) increased by **£5.5 billion** to **£230.1 billion**, partly due to a temporary **£2.5 billion** increase from hedging activity[45](index=45&type=chunk)[46](index=46&type=chunk) [Risk, Capital, and Economic Outlook](index=14&type=section&id=ADDITIONAL%20INFORMATION) [Credit Risk and Impairment Details](index=14&type=section&id=Underlying%20impairmentA) Q1 2025 impairment charge was £309 million, including a £100 million central adjustment for tariff risks Underlying Impairment Charge Breakdown (£m) | Component | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Charges pre-updated MES | 274 | 249 | | Updated economic outlook (MES) | 35 | (192) | | **Underlying impairment charge** | **309** | **57** | Loans and ECL Allowance by Stage (31 Mar 2025) | Category | Stage 1 | Stage 2 | Stage 3 | Total | | :--- | :--- | :--- | :--- | :--- | | **Gross Lending (£m)** | 413,103 | 47,307 | 9,251 | 469,661 | | *% of Total* | *87.9%* | *10.1%* | *2.0%* | *100%* | | **ECL Allowance (£m)** | 902 | 1,344 | 1,477 | 3,723 | - The ECL allowance includes a **£100 million** central adjustment to address downside risks from potential US tariff policies, which were not fully captured in the standard models[37](index=37&type=chunk)[56](index=56&type=chunk)[62](index=62&type=chunk) [Economic Assumptions and Scenarios](index=17&type=section&id=Base%20case%20and%20MES%20economic%20assumptions) UK base case anticipates slow GDP growth, rising unemployment, and gradual rate cuts, with a £100 million ECL adjustment for tariff risks UK Economic Assumptions - Base Case Scenario (2025) | Metric | Q1 2025 | Q2 2025 | Q3 2025 | Q4 2025 | | :--- | :--- | :--- | :--- | :--- | | GDP Growth (QoQ) | 0.2% | 0.2% | 0.3% | 0.3% | | Unemployment Rate (end of Q) | 4.6% | 4.7% | 4.8% | 4.8% | | House Price Growth (YoY) | 3.8% | 3.8% | 2.4% | 1.7% | | UK Bank Rate (end of Q) | 4.50% | 4.25% | 4.00% | 4.00% | | CPI Inflation (YoY) | 2.8% | 3.6% | 3.6% | 3.5% | - The Group's base case assumes a slow economic expansion, with risks largely captured through alternative scenarios (upside, downside, severe downside)[60](index=60&type=chunk) - A **£100 million** central adjustment was made to reflect potential ECL impact from US tariff announcements in early April, as these were deemed not fully captured in the quarter-end models[62](index=62&type=chunk) [Supplementary and Statutory Information](index=9&type=section&id=Supplementary%20Information) [Statutory Results](index=9&type=section&id=GROUP%20RESULTS%20%E2%80%93%20STATUTORY%20BASIS) Statutory profit before tax decreased 7% to £1,517 million due to higher expenses and impairment, despite income growth Statutory Income Statement Summary (£m) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | 3,204 | 3,045 | +5% | | Total Income | 4,695 | 4,387 | +7% | | Operating Expenses | (2,868) | (2,703) | +6% | | Impairment Charge | (310) | (56) | +454% | | Profit Before Tax | 1,517 | 1,628 | -7% | | Profit After Tax | 1,134 | 1,215 | -7% | | Basic Earnings Per Share | 1.7p | 1.7p | 0% | [Alternative Performance Measures (APMs)](index=19&type=section&id=ALTERNATIVE%20PERFORMANCE%20MEASURES) This section reconciles key non-statutory metrics, including banking net interest margin and return on tangible equity Banking Net Interest Margin (NIM) Reconciliation | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Banking Underlying Net Interest Income (£m) | 3,406 | 3,289 | | Average Interest-Earning Banking Assets (£bn) | 455.5 | 449.1 | | **Banking Net Interest Margin** | **3.03%** | **2.95%** | Return on Tangible Equity (RoTE) Reconciliation | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Profit Attributable to Ordinary Shareholders (£m) | 1,006 | 1,069 | | Average Tangible Equity (£bn) | 32.3 | 32.4 | | **Return on Tangible Equity** | **12.6%** | **13.3%** |

Core Viewpoint - Lloyds Banking Group reported a 7% year-on-year decline in pre-tax profit for Q1 FY2025, amounting to £1.52 billion (approximately $2 billion), slightly below market expectations, amid economic uncertainty impacting business growth [1] Group 1: Financial Performance - The bank's loan balance increased by 4% year-on-year, reaching £466.2 billion [1][2] - Operating costs rose by 6% year-on-year to £2.5 billion, including £80 million in redundancy costs related to technology system integration [2] - The bank's stock price has surged 33% year-to-date, yet it fell 2.6% on the day of the earnings report [2] Group 2: Risk Management - The bank set aside £309 million for impairment charges this quarter, exceeding market expectations by £35 million, which included a £35 million provision for potential impacts from U.S. tariff policies [1] - The bank has not allocated additional provisions for its auto finance business, having previously set aside £700 million for regulatory investigations [3] Group 3: Strategic Focus - Lloyds continues to focus on domestic retail and corporate services, reaffirming its financial guidance for 2025-2026 [2] - The CEO is pushing for expansion in wealth management and insurance to diversify the bank's revenue streams [3] - Balancing risk management with business growth amid economic slowdown expectations is a core challenge for management [3]