Image source, ReutersLloyds Banking Group has announced its profits plunged by 28% in the first three months of this year.
The bank posted profits of £1.6bn for the quarter, down from £2.3bn for the same period in a bumper 2023.
Its results showed the amount it made from loans to households and businesses, including mortgages, eased in early 2024 as people continue to be faced with higher borrowing costs.
The UK's biggest lender also said higher running costs had hit margins.
The group, which owns Halifax and Bank of Scotland, said in the three months to the end of March that its net interest income, which is the difference between the money it generates from loans and pays out for deposits, fell 10% to £3.2bn.
The fall was expected as more people moved their cash into savings accounts with higher returns as mortgage rates eased because of competition stepping up among lenders.
Like other UK banks, Lloyds' profits were boosted by the increase in interest rates over the past couple of years, which have allowed lenders to charge more on loans.
Borrowing costs have been hiked as the Bank of England has increased its base interest rate to try to bring down inflation – which measures price rises over time.
Lloyds' latest results showed the shift in more customers moving cash out of current accounts and into savings accounts had continued.
The group's mortgages portfolio and lending to small and medium-sized businesses dropped in early 2024, but business for credit cards and car finance increased.
Charlie Nunn, Lloyds' chief executive, said the quarterly results provided the group with "further confidence" around its strategic ambitions and showed the bank was "continuing to support customers".
Matt Britzman, equity analyst at investment firm Hargreaves Lansdown, said while Lloyds' profit fall looked "substantial from this time last year", it had been expected.
"There are still pressure points, from customers switching to higher-rate accounts to a mortgage market that's not as profitable for banks as it was a few years ago," he added.
"But both those trends are easing. Don't expect to see loan growth shoot the lights out and it was perhaps one area of weakness from these results, along with higher costs."