Lloyds Banking Group reported second-quarter underlying profits of GBP 2.029 billion, beating consensus expectations. Operating expenses and loan losses were lower than expected, with strong income generation. The bank is focusing on fee-based revenue to diversify income streams, with investments paying off in cost savings and efficiency improvements. Loan loss impairments were lower than guidance at 19 basis points for the first half of 2025.

The bank is maintaining its fair value estimate at GBP 78 per share and a narrow moat rating, considering shares to be fairly valued. Lloyds’ strategy of shifting towards fee-based revenue sources shows promising progress, with investments into the business yielding positive results in cost savings and efficiency metrics. Loan losses are tracking below guidance, with positive macroeconomic adjustments contributing to improved outlook for housing prices.

Read more at Morningstar: Good Second Quarter; Shares Fairly Valued