Lloyds cuts UK economic outlook amid inflation concerns as profits fall

Lloyds Banking Group warned over an “uncertain” wider UK economy due to soaring inflation as it posted a 14% drop in quarterly profits.

The lending giant reported pre-tax profits of £1.6 billion for the first three months of 2022, down from £1.9 billion a year earlier, though the fall was not as bad as feared.

It booked an impairment charge of £177 million as it warned that the cost-of-living crisis could affect borrower disposable income, while it also cut its outlook for the UK economy as the Ukraine war compounds inflation pressures.

But it saw costs rise to a lower-than-forecast £2.15 billion from £2.11 billion a year earlier and upgraded its outlook for key profit measures, including its net interest margin, thanks to higher interest rates.

Chief executive Charlie Nunn said: “Whilst we are seeing continued recovery from the coronavirus pandemic, the outlook for the UK economy remains uncertain, particularly with regards to the persistency and impact of higher inflation.

“We are proactively contacting customers where we feel they may need assistance and will continue to help with financial health checks and other means of support.

“We encourage customers, where affected, to get advice early and talk to us.”