Lloyds Banking Group has seen its profit before tax drop by 7% year-on-year in the first quarter, reaching £1.53bn.

The bank said the fall was a result of impairments and slightly higher costs.

Furthermore, its operating costs increased by 6% to £2.55bn, while its underlying profit fell by 13% year-on-year to £1.53bn.

However, in the three months to 31 March, Lloyds’ net income increased by 4% annually to £4.39bn, as its net interest income jumped by 3% to £3.29bn.

Its UK mortgage balance sheet stood at £317.1bn in this period, which is an annual increase of 4%, while its credit cards balance sheet rose by 5% to £15.9bn.

Group chief executive at Lloyds, Charlie Nunn, said: "In the first quarter of 2025, the group delivered sustained strength in financial performance. In particular, net income continues to grow, following the upward trajectory established in the second half of last year. We maintained our cost discipline and asset quality remains resilient.

“We continue to make good progress on our strategic transformation and deliver innovative ways for our customers to manage their financial needs and achieve their financial aspirations, in line with our purpose of Helping Britain Prosper. This supports our ambition of higher, more sustainable returns that will underpin delivery for all of our stakeholders."

Looking ahead, Lloyds said it expects to reach an underlying net interest income of £13.5bn in 2025 and is set to record operating costs of £9.7bn.

Furthermore, its return on tangible equity is estimated to reach 13.5%.

Investment director at AJ Bell, Russ Mould, concluded: "Unlike Barclays, which is a beneficiary of market volatility thanks to the trading part of its investment banking business, the current uncertainty is only bad news for Lloyds.

"The company has increased the amount set aside for bad debts – not based on anything it is seeing yet but as a prudent move to anticipate any impact from the recent turmoil. While there is no change to the current annual guidance, the first quarter showing was slightly behind forecasts thanks to the tariff-related adjustments and as the company absorbed the impact of higher costs.

"The loan book offers evidence of decent demand as the mortgage market picks up and overall, the company seems to be in reasonable shape."

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