- Lloyds Banking Group reported flat first-quarter profits that fell short market expectations amid exceptional costs including charges relating to payment protection insurance and an estimated charge for pulling the Standard Life Aberdeen investment mandate.

For the three months ended 31 March 2019, statutory profit was roughly 24% to £4.4bn with a 6% increase in underlying profit to £8.1bn. That was below expectations from UBS for profit to rise to £1.78bn from £1.60bn.

Statutory profits were hurt by exceptional costs from volatility and other items of £339m, including an estimated charge for exiting the Standard Life Aberdeen investment management agreement, while an additional charge of £100m for Payment Protection Insurance in the first quarter of 2019 also weighed.

Excluding the impact of the charges, underlying profit rose 8% to £2.2b, driven by increased net income and lower operating costs.

Net income rose 2% to £4,420m from a year earlier and operating costs fell to £1.96bn for the quarter, from £2.00bn a year earlier.

Net interest income fell 3% to £3,083m, which the company blamed on a lower net interest margin and average interest-earning assets.

Net interest margin fell to 2.91% in the quarter, from 2.93% a year earlier, but was in line with guidance, with lower deposit costs and increased contribution from higher hedgeable balances offset by continued pressure on asset margins, the company said.

The lender said its common equity tier 1 (CET1) ratio – a key measure of financial strength – strengthened 32 basis points to 14.2% from 14.1% a year earlier.ance

The guidance was reaffirmed and included net interest margin 'remaining resilient around 290 basis points, operating costs below £8 billion in 2019 and a net asset quality ratio below 30 basis points through the plan,' the company said.

'The Group continues to expect a return on tangible equity of 14 to 15 per cent in 2019 and ongoing capital build of 170 to 200 basis points per annum.'

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