Motor finance and wealth progress in spotlight for Lloyds earnings
Investors will be looking for old wounds to be heal and crucial updates on expansion progress when Lloyds Banking Group gives its first-quarter update next week.
The FTSE 100 banking titan – which is frequently cited as the UK’s most-traded stock – will give markets an insight into how it started the new year on Wednesday.
It’s been a rocky period for the firm, with its stock flying past 100p for the first time in nearly 20 years only to tumble lower once more as it got swept up in the Iran war-induced market volatility.
The bank is often viewed as a barometer for the wider UK economy, meaning an extra spotlight will be focused on whether deposits and lending are holding up.
A rise in provisions for bad loans are expected to loom over the FTSE 100 banks reporting period – echoing a similar result in the first quarter of 2022 where banks set aside higher reserves on the back of the Russia’s invasion of Ukraine.
Read about the economic reality check that could come with FTSE 100 banks’ £16bn payday here.
Lloyds wealth in focus
Richard Hunter, head of markets at interactive investor, said investors at Lloyds will be keen to see progress on the group’s mass affluent plans.
“The recent acquisition of Schroder Personal Wealth was a statement of intent,” said Hunter.
Lloyds acquired the remaining 49.9 per cent of Schroders Personal Wealth (SPW) from the asset manager in October handing the bank sole control of the business.
SPW was set up in 2019 in partnership with Lloyds, and supports £17bn assets under administration and 60,000 clients.
“Lloyds’ wealth proposition is underdeveloped – even relative to UK bank peers,” said RBC analysts Benjamin Toms and Ben Bathurst ahead of the SPW deal.
The UK’s big four banks have launched major pushes to capture a slice of the wealth management pie. Natwest snapped up Evelyn Partners in a £2.7bn deal earlier this year, marking the firm’s largest takeover since the financial crisis and a clear indicator of its future growth priorities.
Meanwhile, HSBC splashed $5m (£3.8m) on its luxury wealth centre in the heart of London last year as it targets becoming a top five wealth manager in the UK.
Lloyds shareholders will be on the hunt for any update on how the bank looks to compete with the latest in the wealth arms race with its rivals.
Has the motor finance row ran out of gas?
One issue the bank will be hoping to leave in the dusk will be the motor finance scandal that has haunted Lloyds for more than two years.
The Financial Conduct Authority (FCA) published the final rules on its redress scheme at the end of March, slashing the banking industry’s bill to £9bn from £11bn.
Costs were slimmed in the watchdog’s final rules proposal after the number of qualifying agreements for the scheme dropped to 12.1m from 14.2m.
Despite less people being eligible for the new scheme, the regulator anticipates an average payout of £830.
Russ Mould, investment director at AJ Bell, told Morning Wire “litigation and conduct costs should remain modest” for those with exposure.
Lloyds – which owns the UK’s largest motor finance lender Black Horse – has provisioned around £2bn for potential payouts.
The bank has said whilst it remains “disappointed” with the final scheme and “disagree with its conclusions” it would not legally challenge it.