Lloyds Banking Group has today reported a better than expected 33% rise in first-quarter profit, as increased lending income offset a £151m charge to reflect the impact of the Iran war on the global economy.
The British bank reported statutory profit before tax for January-March of £2 billion, up from £1.52 billion the same time a year ago and above the average analyst estimate of £1.84 billion.
Lloyds said the war in the Middle East could hurt Britain's economy as well as global growth, and trigger a rise in the unemployment rate.
"We are assuming a gradual de-escalation of hostilities over the course of the year," CFO William Chalmers told reporters on a conference call, adding that the bank had taken a small provision to reflect the hit to global growth in that scenario.
Such charges are a feature of accounting rules that were put in place after the 2008 financial crisis, and require banks to measure their loans against market prices and recognise a portion of any expected losses in advance.
The charge was small in relation to the lender's £486 billion loan book, and did not impact profits as Lloyds grew assets and trimmed operating costs by 3%.
The bank said it was on track to meet its performance targets for the year, after lifting its key profitability target in January to make a return on tangible equity greater than 16% in 2026.
Lloyds' shares have gained 34% in the last year as it and other British banks grew income in a favourable interest-rate environment.
The bank's recent financial results have been marred by its exposure to a UK motor finance scandal, in which customers were sometimes not told about hidden commissions.
Lloyds said it had not made any fresh provision for consumer redress in the first quarter.
The UK Finance & Leasing Association, which is leading the banking industry's response to the probe into past commissions, on April 26 said it will not challenge the Financial Conduct Authority's redress scheme which the regulator has estimated will cost the industry £9.1 billion.
Lloyds CEO Charlie Nunn said the bank would present its new strategy alongside its half-year results in July, as its previous five-year plan for 2022-2026 comes to an end.
