(Bloomberg) -- Lloyds Banking Group Plc (LON:LLOY), Britain’s biggest mortgage lender, blamed the cost of compensating mis-sold insurance customers and moving its wealth business for a quarterly profit that missed forecasts.
The bank posted a pretax profit of 1.6 billion pounds ($2.1 billion) for the first quarter. This is lower than a consensus of 1.88 billion pounds compiled by the bank, which said it was due to one-off items including a break fee for moving some wealth funds out of Standard Life (LON:SLA) Aberdeen.
“While Brexit uncertainty persists and continued uncertainty could further impact the economy, given the current strong performance, we are reaffirming all of our financial targets,” Lloyds said in its quarterly earnings statement.
British banks are trying to stick to their growth plans as the uncertainty of Brexit looms. Unlike its peers, Lloyds has so far refrained from setting aside a specific provision to cover a deteriorating economy. Royal Bank of Scotland Group (LON:RBS) Plc said last week that Britain’s patchy growth was likely to bite into income over the coming months. Barclays (LON:BARC) Plc’s U.K. retail division posted weaker quarterly revenues.
Chief Executive Officer Antonio Horta-Osorio has been cutting costs since taking the top job almost eight years ago, reducing the cost-to-income ratio to 44.7 percent in the latest quarter, improving from 49.3 percent at the end of last year. The London-based bank, which has almost all its assets in the U.K., is targeting costs of around 40 percent of its income at the end of 2020, which would make it one of the most efficient European lenders.
Lloyds is looking to diversify its revenue streams, particularly in wealth and insurance. Last year it awarded Schroders (LON:SDR) Plc and BlackRock Inc (NYSE:BLK). a mandate to oversee about 109 billion pounds, aiming “to create a market-leading wealth management proposition.” However, the company on Wednesday flagged break fees to move the funds, contributing to a 339 million-pound charge.
The bank also has bills left to pay for its past misconduct. Lloyds posted a further 100 million-pound provision for customers who were mis-sold payment protection insurance, as the long-running compensation program draws to a close in August. The scandal hit many U.K. banks, but Lloyds’ running total of 19.4 billion pounds by the end of 2018 makes it the biggest spender.