Lloyds Banking Group has reported a 33% increase in its profit before tax year-on-year in the three months to 31 March, totalling £2bn.

The bank said the rise was a result of higher total income, which beat expectations to jump by 9% to £4.8bn, with return on tangible equity (RoTE) standing at 17%.

Lloyds’ underlying net interest income reached £3.6bn, marking an 8% year-on-year increase, which it said reflects a higher banking net interest margin. This was driven by “strong structural hedge income”, alongside franchise led volume growth.

Furthermore, its underlying other income jumped by 11% to £1.6bn, as a result of growth in customer activity and the continued benefit of strategic initiatives.

Its operating costs also dropped by 3% to £2.5bn, reflecting higher cost savings and a lower severance expense, which was partially offset by business growth costs, inflationary pressures and the impact of Lloyds Wealth.

Group chief executive at Lloyds, Charlie Nunn, stated: "In the first quarter of 2026, the group delivered sustained strength in financial performance, growing our income, maintaining our cost discipline and delivering strong profitability. Our differentiated business model remains resilient in the context of the current economic uncertainties. We remain focused on supporting UK households and businesses as they look to strengthen their financial positions and achieve their goals.

"We are building strategic momentum during the final year of our current plan, providing innovative ways for our customers to manage their financial needs and achieve their financial aspirations."

In its outlook, Lloyds said its update reflects events including those relating to the conflict in the Middle East, with assumptions for energy prices and war-related impacts.

It added that based on its "sustained strength" in its financial performance, it has reiterated its guidance, with underlying net income now expected to be greater than £14.9bn and a RoTE of greater than 16%.

Following the update, shares in Lloyds fell by 1.3%.

Senior equity analyst at Hargreaves Lansdown, Matt Britzman, said that Lloyds' Q1 update had a lot for investors to like, although there may be some concerns going forward due to the geopolitical landscape.

He concluded: "The UK backdrop is still far from easy, and Lloyds has taken a more cautious view on the economy, in part because of the impact from the Middle East conflict, but the core engine of the business is performing well.

"The most important message is that guidance has been largely reiterated, with net interest income expectations nudged a touch higher. That suggests management still sees enough support from higher-for-longer rates to offset pressure elsewhere, including competitive mortgage pricing and a softer economic outlook.

"There are still areas to watch, particularly impairments and the wider impact of a weaker UK consumer backdrop, but this was a solid update overall. Lloyds looks to be entering the rest of the year with momentum, a strong capital position, and profit metrics running ahead of its own targets."

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