The dismal outlook for the imending crash5 Mar 2020 11:50
Unfortunately the final quarter of 2019 suggests things could be tougher going forwards.
Business customers are looking less confident, residual values of cars the group finances have declined and bad loans ticked up. None of these are flashing red lights, but they shouldn't be ignored either. Meanwhile consistently low interest rates and increasing competition in the mortgage market means new loans are less profitable than old ones.
CEO Antonio Horta-Osorio's answer is greater exposure to riskier, but higher returning, loans like auto-finance and unsecured lending as well as increasing the amount lent to SMEs. Lloyds has also banked on a growing Wealth and Retirement business going forwards, through a partnership with Schroders. The market is potentially lucrative but it'll take time to get up and running and so far success has been driven by capital intensive insurance contracts.
If current trends continue we think it will be increasingly difficult for Lloyds to grind out growth. Worse, if conditions deteriorate significantly, this quarter's numbers suggest to us that Lloyds could really struggle.
It doesn't help that all progress already made means there are fewer strings to pull when times turn bad. There's only so far you can push cost savings after all.