Lloyds Banking Group (LSE:LLOY) shares were largely unmoved in early trading today (29 April) after the bank reported another strong quarter, this time for the three months ended 31 March 2026.
Let’s dig a little deeper and see what’s going on.
Beating expectations
The headline numbers were as follows:
- Net interest income: £3.57bn compared to the consensus estimate of analysts of £3.55bn.
- Net interest margin: 3.17% versus a forecast of 3.15%.
- Earnings per share (EPS): 0.3p better than predicted at 2.4p.
Overall, the bank’s post-tax profit was £215m better than analysts had expected. Importantly, its impairment charge came in £95m lower.
Those looking for evidence of how much progress the bank has made over the past year, should consider its EPS. This quarter, it was 0.7p better than a year ago. As well as higher income and lower costs — its cost-to-income ratio has improved by a massive 6.2 percentage points over the past 12 months — a significant share buyback programme has helped contribute to this impressive performance.
Given that all of the bank’s key performance measures are going in the right direction, I find the lack of enthusiasm among investors a little surprising.
Of course, in some respects, Lloyds is a victim of its own success. Its recent share price rally suggests that the City has already priced in some of this improvement. But the bank’s share price remains around 14% below its 52-week high. Judging by today’s reaction, it’s going to need something special to get it back to the level it enjoyed at the start of February.
We are confident in our delivery for the year ahead and reiterate our guidance for 2026
Charlie Nunn, Chief Executive, Lloyds Banking Group
However, in my opinion, there’s not much to dislike about the results.
So, is it worth me considering taking a stake in the UK’s second-largest bank?
My view
I don’t think so.
For a long time now, I’ve thought that analysts are being overly optimistic when it comes to the group’s future prospects.
Admittedly, today’s results are another reminder that I could be wrong. However, it’s too early to tell for sure. Even so, I’m not tempted to invest. Although interest rates look likely to remain higher for longer than previously expected, which should help the margin, it could tip some already struggling borrowers over the edge.
And its dependence on a fragile domestic economy remains a concern. Among G7 countries, the OECD says the UK will be the worst affected by events in the Middle East. Due to high government debt and a reliance on energy imports, higher oil and gas prices are expected to lead to rising inflation and damage economic growth.
Of further concern, a recent survey found that business confidence is at its lowest level since the pandemic.
Against this backdrop, I find it hard to see how Lloyds can continue to meet (or exceed) analysts’ forecasts. But I’ll admit I’ve been proved wrong before. The share price defied my expectations throughout most of 2025, soaring by an incredible 79%.
However, given the uncertainty at the moment, I’m going to wait another three months and look again next quarter. In the meantime, I’ll continue to explore other exciting opportunities.
