Despite a 14 per cent rise in its net income to £18bn as reported in its full year results for 2022, this was offset by a credit impairment charge. In 2022, Lloyds Banking Group made a credit impairment charge of £1.5bn and wrote off £1.3bn in 2021.
The group said it would continue to monitor the macroeconomic environment through early warning indicators to ensure plans are in place to mitigate risk and support customers.
Its profit after tax saw a slight six per cent dip to £5.6bn.
‘Attractive’ mortgage lending
Lloyds Banking Group saw its mortgage balances rise by £3.7bn to £311bn in 2022 including a £1.2bn net open book growth in Q4. Over the year, its open book grew by £6.3bn.
It said mortgage lending was still “attractive” from a returns and economic value perspective.
It acknowledged that rising mortgage costs had been an “unexpected shock” to borrowers and said the full consequences would be felt over the coming years as product terms matured.
Over the year, Lloyds Banking Group offered support to 200,000 customers to cope with rising rates.
Its net interest margin improved by 40 basis points to 2.94 per cent while its net interest income increased by 18 per cent to £13.2bn. In Q4, its net interest margin reached 3.22 per cent which it put down to rising rates and temporary pricing lags. In 2023, the group expects its net interest margin to exceed 3.05 per cent.
Over the year, it completed £3.5bn in green mortgage lending and aims to increase this to £10bn by 2024. Some £14.3bn was lent to first-time buyers in 2022.
Resilient borrowers
Lloyds Banking Group said its retail loan portfolio was “resilient” and the average loan to value (LTV) ratio of its mortgage book was 42 per cent. Some 94 per cent of its book was below 80 per cent LTV. The average household income for its mortgage borrowers was £75,000.
Lloyds Banking Group said there was only “modest evidence of credit deterioration” within its mortgage portfolio. Some 1.2 per cent of its mortgage book is more than three months in arrears, down from 1.4 per cent in 2021.
It said its mortgage portfolio was “well positioned” with low arrears and a strong LTV profile.
Charlie Nunn, group chief executive of Lloyds Banking Group, said: “While the operating environment has changed significantly over the last year, the group has delivered a robust financial performance with strong income growth, continued franchise strength and strong capital generation, enabling increased capital returns for shareholders.
“We continue to believe our strategy will create higher, more sustainable returns, as reflected in our enhanced guidance. We are excited about the opportunities ahead.”
