Lloyds Banking Group Delivers Sustained Strength in Q1 2026, Reiterating Modest Increase in Net Interest Income Guidance
Lloyds Banking Group has made a strong start to the year, delivering sustained strength in its financial performance in Q1 2026. The company's strategy continues to gain momentum, with key highlights including continued growth in income, ongoing cost discipline, and strong asset quality.
In the first quarter, Lloyds Banking Group reported statutory profit after tax of £1.6 billion, equating to a return on tangible equity of 17%. Net income was up 9% on the previous year and 1% higher than Q4, driven by further progress in net interest income, supported by a net interest margin of 3.17%, up 7 basis points in Q1. Other income also grew by 11% year-on-year.
The company's operating costs for the quarter were £2.5 billion, down 3% year-on-year, reflecting its disciplined approach and continued efficiency savings. The remediation charge for the quarter was £11 million, with no additional provision for motor finance. Credit performance remained strong with an impairment charge of £295 million in Q1, an asset quality ratio of 25 basis points.
Lloyds Banking Group also saw continued strength across its lending portfolios in Q1, with lending balances closing the quarter at £486 billion, up £5.1 billion or 1% versus Q4 2025. Mortgages grew by a net £1.6 billion, despite a competitive market and significant maturities.
The company's deposit strategy remained disciplined, with total deposits down slightly by £0.6 billion in the quarter. However, commercial deposits were up £2.3 billion, driven by growth in corporate and institutional banking. Insurance, pensions, and investments saw open book net new money flows of £2.2 billion, supported by inflows from its workplace franchise.
Net interest income continues to grow robustly, with NII for the quarter at £3.6 billion, up 1% versus Q4 and up 8% year-on-year. Strong growth in customer lending and hedge income continues to offset mortgage repricing headwinds. Average interest earning assets for Q1 were £473.5 billion, up 1% compared to the prior quarter.
Lloyds Banking Group's CEO, William Chalmers, expressed confidence in the outlook for its business, stating that the company has "a resilient business model that positions us well in the context of the current macroeconomic environment." He also reiterated the company's 2026 guidance, including a modest increase in net interest income.
