Statutory pre-tax profit increased to 2.04 billion pounds from 280 million pounds in Q1 2012, the gulf created between the two figures largely down to there being no money set aside to cover mis-sold financial products this year, while impairment charges were significantly reduced, by 40% to 1 billion pounds, which exceeded expectations. Management was also able to cut costs by 6% against the comparative quarter, to 2.41 billion pounds, while "simplification run-rate savings" rose to over 1 billion pounds.
Profits were aided by group net interest margin increasing to 1.96%, which is on track to meet guidance for 2013. Elsewhere, total underlying income rose 3% to reach 4.89 billion pounds, which took into account the 394 million-pound gain relating to the sale of shares in St. James's Place.
Chief executive Antonio Horta-Osório commented:
We made substantial progress again in the first quarter. Underlying and statutory profits improved significantly, and our core loan book returned to growth earlier than expected. Margin increased, and costs and impairments continued to fall rapidly, with this progress underpinned by a further strengthening of our balance sheet.
We are delivering real benefits for customers, colleagues and shareholders by investing behind our simple, UK customer-focused retail and commercial banking model, and are now further ahead in our plan to transform the Group, as reflected in the enhanced guidance for costs and capital we are giving today.
The 39% taxpayer-owned bank declared last week that it still intends to rebrand 632 branches as TSB Bank and float the division on the stock market, after the European Commission had instructed Lloyds to sell the branches as part of the state bail-out the bank received during 2009. Additionally, the sale of its Spanish retail operations will lead to a further reduction of 1.5 billion pounds in non-core assets.
Positive news like today's is beginning to see investors take an interest in the sector once more. Banking's fortunes remain tied to the activities across the eurozone for now, but if it can recover then there could be significant gains to be made.
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