Lloyds sets aside millions as tariffs disrupt UK economy
- Lloyds Banking Group's profits fell by 7% in the first quarter of 2025, affected by higher costs and impairment charges.
- The bank set aside 100 million pounds ($133 million) to address the economic impact of trade tariffs imposed by the U.S.
- These tariff impacts may lead to caution among banks regarding credit quality and loan demand.
On May 1, 2025, Lloyds Banking Group, a leading financial institution in the United Kingdom, reported a decrease in profits for the first quarter of the year. The bank’s profits fell by 7%, a drop attributed to heightened costs and impairment charges. These financial challenges came while the bank also faced the repercussions of trade tariffs imposed by the United States. Lloyds set aside 100 million pounds ($133 million) specifically to manage the financial implications of these tariffs, highlighting the unpredictable nature of the current economic landscape. The impairment charges, totaling 309 million pounds, included 35 million pounds related to changes in the economic outlook, emphasizing the concerns raised by the recent tariff changes. The bank described the initial non-UK tariffs introduced in early April as larger than anticipated, reflecting a market response that has led other banks to warn about potential negative impacts on credit quality and demand for loans. Such developments have posed significant challenges to the UK’s economic landscape, typically benchmarked by Lloyds' performance. Despite these challenges, the bank noted a growth in UK home loans amounting to 4.8 billion pounds compared to the same quarter of the previous year. This growth was attributed to lower interest rates and the rush to finalize loans before a tax advantage for home buyers expired in April. William Chalmers, CFO of Lloyds, expressed concerns over whether the momentum for mortgage growth would continue, suggesting a potential slowdown in the coming months. He stated that initial strong mortgage completions could be less common moving into the second quarter of the year. While Lloyds Banking Group has reaffirmed its financial forecasts for 2025 and 2026, uncertainties regarding the economy remain high, particularly due to the impact of tariffs. Moreover, the bank has not recorded additional funds to cover potential expenses associated with a customer redress scheme connected to investigations into the mis-selling of car loans, having already set aside 1.15 billion pounds for this purpose. Such situations highlight the intricate interplay of trade policies and economic performance in leading financial institutions like Lloyds, as they navigate the choppy waters of the current economic climate.