Lloyds profit falls, sets aside £100m amid tariff uncertainty
Lloyds' (LLOY.L) profits fell in the first quarter, with the bank flagging that it had set aside provisions amid uncertainty over US tariffs.
Profits before tax fell 7% year-on-year to £1.52bn ($2bn), according to the first quarter results published on Thursday, which was below consensus estimates of £1.53bn provided by the bank.
Net interest income (NII) — the gap between what it pays out to savers and receives from borrowers in interest — was up 5% on the first quarter last year at £3.2bn. This was also just shy of analyst expectations of £3.26bn.
Lloyds said it had included "assumptions for expected tariffs and potential responses in its quarter-end base case conditioning assumptions prior to announcements at the start of April.
Read more: Barclays profit surges more than expected as investment banking business thrives
"Initial non-UK tariffs announced in the first few days of April and the immediate market response were larger than expected," the bank said.
"Accordingly, the Group has adopted a £100m central adjustment to reflect the potential ECL [expected credit losses] impact, informed by high level sensitivity to key UK economic metrics based on tariff scenarios."
In its fourth quarter results in February, Lloyds said it had set aside a further £700m for potential remediation costs relating to relating to motor finance commission arrangements, taking the total it had put aside to £1.2bn.
The motor financing scandal over how consumers have been sold car loans has opened up the possibility that lenders could end up paying out tens of billions of pounds in compensation. In October, the court of appeal ruled it unlawful for dealerships to receive commissions on car finance deals without securing 'fully informed consent' from buyers.
Read more: HSBC profits drop less than expected as bank announces share buyback of up to $3bn
Lenders Close Brothers (CBG.L) and FirstRand (FSR.JO) have sought to overturn the ruling, and the case headed to the UK's supreme court earlier this month to hear evidence, before it makes judgement on the issue, which is expected in July.
The Financial Conduct Authority (FCA), the UK regulator, has said the supreme court's decision would inform its next steps and would confirm if it was proposing a redress scheme within six weeks of the ruling.
Lloyds owns motor finance company Black Horse, which is one of the biggest car finance providers in the UK.
In its first quarter results, Lloyds said there have been "no further charges relating to motor finance commission arrangements".
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