Lloyds Banking Group has reported a pre-tax profit of £2 billion for the first quarter of 2026, a 33% increase compared with the same period last year. The figure exceeded analyst expectations of £1.8 billion, driven by an 8% year-on-year rise in underlying net interest income.
The bank benefited from interest rates remaining at 3.75%, with hopes of a cut dashed by the conflict in the Middle East. Its lending book grew by more than £5 billion, and around 790,000 new savings accounts were opened during the quarter. Operating costs dipped following savings made by the bank.
Chief executive Charlie Nunn said the group's business model was "resilient in the context of the current economic uncertainties". He added: "We remain focused on supporting UK households and businesses as they look to strengthen their financial positions and achieve their goals."
However, Lloyds published new economic forecasts reflecting the possible "stagflationary consequences for the global and UK economies" of recent events, including the war in the Middle East. The bank now expects GDP growth to halve to 0.5% for 2026, down from its previous forecast of over 1%.
The revised outlook also projects unemployment rising to 5.6% by the second half of the year and Consumer Prices Index inflation reaching 3.9% by the final quarter. Interest rate cuts are now expected to be delayed until 2027, with higher energy prices likely to renew inflationary pressures.
Finance chief William Chalmers said: "This is not a recessionary environment, to be clear. This is a slowdown in growth expectations versus where we were at the beginning of the year, caused by the Middle East conflict." He defended the bank's profits, saying "profitability of banks is an incredibly important component of a successful economy".
