- Lloyds fails to impress after strong run for its shares
- Net interest margin tightens
- Motor finance mis-selling probe a source of uncertainty
“The company may have just about squeaked ahead of forecasts with its latest results but a lack of upgrades following a strong run for the share price has put Lloyds on the back foot,” says AJ Bell investment analyst, Dan Coatsworth.
“The market may also be focusing on a decline in key metrics – including net interest margin, which measures the difference between the amount a bank earns on lending versus what it pays out for deposits.
“Given rates have stayed higher for longer, there may have been some expectation that Lloyds would have done rather better on net interest margins. In a competitive market for mortgages and savings products the initial boost provided by the rate hiking cycle may have played out.
“Whether or not the Bank of England cuts rates at its meeting next month, we are likely at the current peak. That suggests the only way for rates to go is down.
“The main driver of Lloyds’ better-than-expected second quarter performance was a lower than anticipated impairment charge. While it is reassuring that the company is not facing a big uptick in bad debts, it does not tell us much about the underlying momentum in the business.
“Ticking over in the background, like an idling taxi waiting for a passenger, is the ongoing motor finance mis-selling scandal, currently subject to an FCA review. The regulator has said it will set out the next steps of its probe by 24 September. Lloyds made no additional provisions for this issue in the first half, beyond what it had previously allocated.”
