Lloyds Earnings: Overall Within Expectations; 2024 Net Interest Margin Looks Achievable

Lloyds reported fourth-quarter 2023 results in line with expectations. Net income decreased to GBP 4.232 billion on an underlying basis from GBP 4.514 billion last quarter, while operating expenses increased to GBP 2.486 billion from GBP 2.241 billion. Net interest income declined 4% on a lower banking net interest margin of 298 basis points (308 basis points last quarter), driven by deposit and mortgage margin pressure. Positively, the shift in deposits is showing signs of slowing, similar to what U.K. peers have posted this earnings season. A GBP 450 million remediation charge Lloyds took after a Financial Conduct Authority review into potential motor financing mis-selling was unexpected. The bank highlighted that it still sees material uncertainty around the actual remediation necessary in this matter, if any. We maintain our fair value estimate of GBX 77 per share and narrow moat rating.