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Lloyds' (LLOY.L) profits fell in the first quarter, with the bank flagging that it had set aside provisions amid uncertainty over US tariffs.
Profits before tax fell 7% year-on-year to £1.52bn ($2bn), according to the first quarter results published on Thursday, which was below consensus estimates of £1.53bn provided by the bank.
Net interest income (NII) — the gap between what it pays out to savers and receives from borrowers in interest — was up 5% on the first quarter last year at £3.2bn. This was also just shy of analyst expectations of £3.26bn.
Lloyds said it had included "assumptions for expected tariffs and potential responses in its quarter-end base case conditioning assumptions prior to announcements at the start of April.
"Initial non-UK tariffs announced in the first few days of April and the immediate market response were larger than expected," the bank said.
Read more: Barclays profit surges more than expected as investment banking business thrives
"Accordingly, the group has adopted a £100m central adjustment to reflect the potential ECL [expected credit losses] impact, informed by high level sensitivity to key UK economic metrics based on tariff scenarios."
Impairment charges, which refers to the writing off of assets that have fallen or lost all value, had risen to £310m in the first quarter, up from £56m in the same three months last year.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "This was more of a canter than a full gallop from Lloyds, as first-quarter results stumbled slightly at the final hurdle.
"Higher impairments were partly to blame for the small profit miss, but this was largely due to caution around the economic outlook rather than any real issues with borrowers. Default rates across the portfolio remain in excellent shape, and management sounded confident about the outlook for the year."
"Investors may be slightly disappointed not to see something stronger, especially after Barclays (BARC.L) raised its guidance yesterday," he said.
"But that’s nitpicking — this was a solid set of results, and Lloyds looks well-positioned to deliver meaningful shareholder returns over the coming years."
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In its fourth quarter results in February, Lloyds said it had set aside a further £700m for potential remediation costs relating to relating to motor finance commission arrangements, taking the total it had put aside to £1.2bn.
The motor financing scandal over how consumers have been sold car loans has opened up the possibility that lenders could end up paying out tens of billions of pounds in compensation. In October, the court of appeal ruled it unlawful for dealerships to receive commissions on car finance deals without securing “fully informed consent” from buyers.