By Elena Vardon

Lloyds Banking Group confirmed its full year guidance as revenue from loans held up in the first quarter though heavier forward-looking provisions weighed on its profit.

The U.K.'s largest mortgage provider on Thursday said that its net interest income--the difference between what banks earn on loans and pay out on deposits--rose 3% to 3.29 billion pounds ($4.39 billion) for the three months ended March. Including revenue from other sources, total net income increased 4% on year to 4.39 billion pounds.

Like its peers, Lloyds has a structural hedge in place to mitigate the impact of interest-rate moves by the Bank of England, allowing it to continue to benefit from tailwinds in an environment of falling rates. The bank's net interest margin came in at 3.03%, which marked an improvement from the previous quarter's 2.97% margin.

Mortgage balances grew by almost 5 billion pounds, with half of the amount completed in March ahead of the increase of stamp duty tax on home purchases which kicked in on April 1.

Along with higher income, the high street bank reported heavier costs as it frontloaded some investments and booked provisions for bad loans. This led pretax profit to fall 7% to 1.52 billion pounds, roughly in line with expectations.

Lloyds set aside 309 million pounds in impairments for bad loans. This included 100 million pounds for any impacts related to the fallout of the trade tariffs announced by the U.S. early April and 35 million pounds for adjustments in its economic outlook.

"Asset quality remains very resilient across the group, reflecting healthy customer behaviors and prudent lending," Finance Chief William Chalmers said in a call with journalists.

The bank remains vigilant for any potential second order impacts from tariffs given the limited direct exposure to U.K. exporters to the U.S., which represents less than 1% of its lending book, he added. "It's really that which has helped inform our revised expectations for...economic forecasting going forward," Chalmers said.

"We remain confident in the outlook for Lloyds Banking Group and in our 2025 and 2026 guidance," Chief Executive Charlie Nunn said in a statement.

Shares in London traded 2% lower in morning exchanges at around 72 pence.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

May 01, 2025 05:16 ET (09:16 GMT)

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