Mortgage boom helps bank beat forecasts

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A branch of a Lloyds Bank in London.  Photo: Tolga Akmen/AFP via Getty Images

A branch of a Lloyds Bank in London. Photo: Tolga Akmen/AFP via Getty Images

Shares in Lloyds Bank (LLOY.L) rose to a one-year high on Wednesday after beating forecasts for quarterly performance thanks to a mortgage boom in the UK.

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The British bank reported a pre-tax profit of £1.9bn ($2.6bn) on a net profit of £3.7bn in the first three months of 2021. City analysts had expected Lloyds to make a profit of £1 .1 billion on a net profit of £3.5 billion

The outperformance was due to a boom in mortgages. Lloyds netted £6bn worth of houses in the quarter, including £4bn to new buyers. Mortgage underwriting was at its highest level since 2008.

CEO Antonio Horta-Osorio, who was in charge of his latest set of results, said: “We started the year strong with quarterly results and delivering Strategic Review 2021.”

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READ MORE: Property boom and bright outlook for UK help HSBC profit up 79%

Lloyds raised some forecasts in light of its strong performance, including projections for net interest margin, cost reductions and return on equity.

However, Horta-Osorio said: “While we are seeing positive signs, in particular the progress of vaccine roll-out and the emergence of lockdown restrictions, the outlook remains uncertain.

“The group remains absolutely focused on supporting its customers and helping Britain recover from the financial impact of the pandemic.”

The bank released £323 million from loss provisions it had set up in previous quarters, citing the improving economic outlook in the UK.

Lloyds said it would continue to accrue dividends with a view to resume them later this year.

In London, shares rose more than 4%.

Lloyds rose on the update.  Photo: Yahoo Finance UK

Lloyds rose on the update. Photo: Yahoo Finance UK

The bank had reported strong momentum within the business late last year within thanks to a boom in the UK property market. A stamp duty holiday caused Lloyds to hand over mortgages as home hunters rushed to take advantage of the tax break.

Co-op Bank and Santander UK both reported rising mortgage activity on Wednesday. Santander UK (SAN.MC) grew its mortgage portfolio by £1.5 billion in the first quarter, while Co-op Bank netted £1 billion in real estate.

The results come a day after HSBC (HSBA.L) delivered a predicted set of results, driven in part by the ongoing property boom in Britain.

Lloyds finance chief William Chalmers said mortgage demand was expected to decline in the second half of the year after the Stamp Duty holiday ended in June, but said there were cyclical factors that meant the property market was likely still buzzing. would stay.

Chalmers said demand was driven in part by “people’s changing habits in terms of the type of accommodation they want to live in.”

“That’s driving a part of the mortgage market that I think will last, probably much longer than this year,” he told reporters.

READ MORE: Lloyds CEO accelerates exit to take on Credit Suisse role

Wednesday’s results draw a line under Horta-Osorio’s decade in charge at Lloyds. The Portuguese banker leaves for Credit Suisse on Friday (CS), where he becomes chairman.

“It is with both pride and sadness that I am stepping down as group director later this month,” he said in a statement. “The Group is well placed for sustained success.

“The group also has exceptional people. I am very proud of all our colleagues.”

Robin Budenberg, Chairman of Lloyds, said: “As this is António’s last set of results, I would like to take this opportunity to thank him on behalf of the Board of Directors for his outstanding contribution.”

Horta-Osorio will be replaced by Charlie Nunn, the current head of wealth and personal banking at HSBC.

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