Profits have plunged at Lloyds Banking Group in the wake of its record results last year.

Britain’s biggest mortgage lender, whose subsidiaries include Halifax and Bank of Scotland, said pre-tax profits for the first three months of 2024 were £1.6bn.

The figure is down 28% from the £2.3bn it reported during the same period last year.

However, the banking giant said the results were in line with its expectations.

Analysts had forecast profits of £1.7bn for the quarter.

Lloyds blamed higher business costs – including a sector-wide new Bank of England levy – and lower net interest income, which is the difference between what it generates from loans and pays out for deposits.

The group is the first major UK bank to announce its results for the first quarter of this year.

Shares in the company dropped 2% when markets opened after the publication of the figures on Wednesday morning.

It comes after Lloyds reported a record annual pre-tax profit of £7.5bn in 2023.

The lender credited higher interest rates, introduced by the Bank of England to tackle inflation, for the boost.

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The pace of price rises has been gradually easing in recent months in many nations, heightening expectations of limited rate cuts by central banks later this year.

Chief executive Charlie Nunn said: “The group is continuing to deliver in line with expectations in the first quarter of 2024, with solid net income, cost discipline and strong asset quality.

“Our performance provides us with further confidence around our strategic ambitions and 2024 and 2026 guidance.”

He added that the bank was continuing to “support customers” and “help Britain prosper”.

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Lloyds also updated its forecasts for the year ahead amid the UK’s improving economic outlook.

It estimates that house prices across the UK will rise by 1.5% this year – after previously predicting they would fall.

Lloyds announced in January it planned to cut about 1,600 jobs across its branch network as it shifts its business towards online banking.

The group is also axing its fleet of mobile banking vans as part of the plans.

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