The decline was primarily driven by higher costs and increased impairment charges for potential bad debts.

The bank set aside £309 million for potential loan defaults, exceeding previous guidance. This included a specific £35m provision attributed to the potential economic impact of US trade tariffs, although chief financial officer William Chalmers noted the bank’s direct US exposure is “very limited”.

Conversely, Lloyds experienced significant mortgage growth, with balances increasing by nearly £5bn in the quarter. This was fuelled by a rush of activity before stamp duty relief for first-time buyers was reduced on 1 April. The bank recorded its busiest ever day for mortgage completions on 27 March, contributing to a 50% rise in overall completions for the month and serving 20,000 first-time buyers in the quarter. Lloyds forecasts UK house prices will rise by 2.9% this year.

The bank’s net interest margin, the difference between lending income and deposit payouts, improved slightly to 3.03%. No additional provisions were announced regarding the ongoing motor finance commission investigation, for which £700m was allocated in February. A Supreme Court ruling on the matter is anticipated in July.

John Moore, senior investment manager at RBC Brewin Dolphin, said: “Lloyds’ results are from a similar playbook to its peers earlier in the week – all in all, it has delivered a resilient, but mixed, set of figures.

“Rising income and a stronger net interest margin have been offset by an increase to costs and more money being set aside for impairments, including £100m for tariff-related issues.

“Lloyds is the most exposed of the UK banks to Britain’s economy, which could present challenges if growth doesn’t pick up. But the big question mark hanging over the bank is the potential cost of mis-sold car finance products, with a ruling expected by the Supreme Court in July.

“There is a ‘business-as-usual’ feel to this morning’s update; but, as has been said for some time, Lloyds is moving closer to the point of needing to set out its long-term plans and strategic direction for the future.”