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Lloyds Banking Group on alert as mortgage arrears rise

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  • 26/07/2023
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Lloyds Banking Group on alert as mortgage arrears rise
Lloyds Banking Group has put “heightened monitoring” in place to spot signs of affordability stress as arrears rose in the first half of the year.

In its report for H1 2023, the group said that as of 31 June, 1.3 per cent of its mortgage book was more than three months in arrears, against 1.2 per cent of its book in the half year to 30 December. This represented 28,575 mortgages. 

Broken down, 1.2 per cent of its mainstream mortgage book was in arrears, as was one per cent of its buy-to-let accounts and 8.6 per cent of its specialist mortgage portfolio. 

Lloyds said it had only seen a “modest deterioration” in its credit performance, which was mostly evident in its mortgage portfolio where new to arrears and flow to default increased on legacy variable rate loans. 

Its underlying impairment charge rose from £377m in H1 2022 to £662m this year, which it said related to the expected credit loss going into a “more adverse economic outlook”. 

Within its UK mortgage business, the total value of loans and advances fell from £312.7bn in the six months to December to £308.1bn in the six months to June this year. The average loan to value (LTV) rose from 41.6 per cent to 42.3 per cent, while the share of mortgages at 90 per cent LTV or higher increased from 1.4 per cent to 1.7 per cent. 

 

Financial performance 

Its statutory profit after tax came to £2.9bn in the first half of 2023, which was 17 per cent higher year-on-year. In Q2, the group’s profit after tax declined by 25 per cent to £1.2bn. 

It posted a net interest margin of 3.18 per cent and a net interest income of £6.bn, which was 13 per cent up annually. 

Charlie Nunn, group chief executive of Lloyds Banking Group, said: “We know that rising interest rates, cost of living pressures and an uncertain economic outlook are proving challenging for many people and businesses. Guided by our purpose of Helping Britain Prosper, we remain fully focused on proactively supporting our customers and helping them navigate the current environment.  

“The group delivered a robust financial performance in the first half of 2023 with strong net income and capital generation alongside resilient asset quality. We continue to make good progress on delivering our strategic initiatives. Combined with our franchise resilience, this better positions us to support our customers, both today and in the future.” 

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