Lloyds – Impairment Reversal Paying Dividends

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Lloyds – Impairment Reversal Paying Dividends
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Lloyds Banking Group PLC (LON:LLOY) had net income of £4.1bn in the third quarter, largely reflecting increases in interest income from increased mortgage lending. There were also strong returns from the group’s equity investments as well as benefits from higher used car prices.

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Q3 2021 hedge fund letters, conferences and more

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The release of credit provisions meant underlying pre-tax profit rose to £2.2bn, from £1.2bn this time last year.

Given the “solid financial performance and the improved UK macroeconomic outlook”, Lloyds has upgraded full year guidance. It now expects a net interest margin of above 2.5% and a return on tangible equity of over 10%.

The shares rose 2.0% following the announcement.

Lloyds Is Sitting Pretty

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown:

“Lloyds is following the path trodden by other banks. A better-than-expected economic outcome from the pandemic means money that was put aside for debt defaults can now be released, plumping up profits in the process. Put that together with the fact mortgage lending remains elevated, and Lloyds is sitting pretty.

Despite the removal of some helpful tailwinds, there’s reason to expect mortgage activity will remain buoyant as Lloyds heads into the final quarter. A longer-term question is the future of Lloyds’ position as the UK’s largest bank branch network. Habits have changed since the pandemic, and the days of the bank branch could be numbered, especially as digital banking is so much more cost effective for the banks themselves.

Positive trends are coming through in Lloyds’ net interest margin, which looks at the difference between what the bank charges on loans and pays on deposits. With thoughts that interest rates could budge upwards in the not-too-distant future, the banking giant could be looking forward to a meaningful boost on that front.”


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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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