Lloyds 'expects narrowing of net interest margin'

25 October 2011

The largest mortgage lender in the UK has claimed its net interest margin is likely to narrow in the second half of 2011.

Lloyds Banking Group - whose brands include Lloyds TSB, Halifax and Bank of Scotland - is to alter the way it allocates capital and funding costs and believes the difference such a move will make is likely to see this gap shrink to 2.05 per cent for the full year, Bloomberg reports.

This figure - which depicts the difference between what a lender makes through loans and the price of its funding - stood at 2.12 per cent for the first six months of the year.

Ian Gordon, an analyst at Evolution Securities in London, said Lloyds is seeking to reaffirm margin guidance provided in August, adding this strategy is a little surprising, "as we were expecting a modest deterioration to guidance versus August given that short-term funding costs have risen".

By Claire Archer

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