Lloyds Bank reported an increase in operating costs in the first quarter driven by higher inflation and increased investment in technology. 

“Cost management remains a core discipline for us as a group,” Chief Financial Officer William Chalmers said during the bank’s earnings call today. Operating costs “include expected elevated severance charges taken early in the year to facilitate cost efficiencies.” 

Lloyds will continue to make “strategic investments” in technology in the face of inflation to manage its costs better throughout the year, Chalmers said.

The $1.1 trillion bank reported operating expenses, which include technology-related expenses of 2.4 billion pounds ($2.9 billion), up 11% year over year. 

The bank’s retail deposits dropped by 7% YoY to $128 billion. Commercial banking deposits also decreased by 4% YoY to $197 billion, according to the bank’s earnings report. 

“We expect the deposit churn to stabilize over the course of the year” as potential rate cuts will help the bank in shoring up deposits, Chalmers said. 

THE BIG PICTURE: Bank of America, JPMorgan and Wells Fargo also reported an increase in noninterest expense in Q1, partly driven by increased investment in technology. 

JPMorgan reported noninterest expense of $22.8 billion, up 13% YoY, while Wells Fargo reported noninterest expense of $14.3 billion, up 5% YoY, according to the banks’ earnings reports. 

Wells Fargo will “continue to invest in talent, technology and branches to optimize customer experience,” Chief Executive Charlie Scharf said during the bank’s Q1 earnings call on April 12. 

BY THE NUMBERS: In Q1, Lloyds reported; 

• Net income of $5.2 billion, down 9% YoY; 
• Credit card balances of $18.8 billion, up 1% YoY; and 
• Net interest income of $3.8 billion, down 10% YoY. 

OF NOTE: Lloyds Bank is exploring mergers and acquisitions this year, specifically in the regtech, insurtech and cybersecurity space, Robin Scher, head of fintech investment at Lloyds, said at FinovateEurope in February. 

The London-based bank will explore gen AI investments with caution as “people are scared of gen AI” due to inaccuracies, Scher said. The banking industry will keep a close eye on how big-tech vendors will develop and deploy the technology, he said. 

FLSHBACK: During the bank’s Q4 earnings call on Feb. 22, Chief Executive Charlie Nunn said that the bank aims to save $1.5 billion in expenses by modernizing its platform. 

In 2023, the bank filled 2,500 tech and data positions to boost its tech offering and has reduced its legacy technology applications by 10% since 2021, according to the bank’s Q4 earnings report. 

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