Lloyds Banking Group produced strong half years numbers this morning with statutory profits after tax of £2.9bn – up 17% on 2022.

Boosted by high interest rates. the bank revealed underlying net interest income rose 14% to £7bn, although customer deposits of £469.8bn were £5.5bn lower.

Overall, loans and advances to customers reduced by £4.2bn (£1.6bn in the second quarter) to £450.7bn, impacted by the first quarter £2.5bn legacy mortgage portfolio exit and net reductions in the open mortgage book.

The banking group, which is the UK’s largest mortgage provider, lent £5.6bn to first-time buyers and provided around £1bn in new funding to social housing sector in the first half of 2023.

Sifting through the latest numbers, AJ Bell head of financial analysis Danni Hewson comments: “Much will be made of Lloyds Banking Group’s 23% jump in first-half profit amid the backdrop of a cost-of-living crisis and increased pressure from regulators to share the benefits of interest rate hikes with savers.

“The net interest margin, the difference between what a bank earns in interest from loans and what it pays out, is slightly higher than analysts had forecast for the quarter, though down on where it had been in the three months previously”.

Hewson believes there are storm clouds gathering as the country’s biggest mortgage lender has to consider how many of its customers are likely to struggle as they face a jump from ultra-low fixed rates to the unexpected ‘new normal.

“Lloyds boss Charlie Nunn admitted that customers were facing “significant challenges” and said that over 200,000 of its mortgage customers were among those worst affected by rising costs, a number that’s likely to be dwarfed over the coming months. To that end the bank has set aside an extra £662 million to cover expected ‘bad’ loan losses”, she says.