Lloyds Banking , Britain’s biggest mortgage lender, said it will exceed its lending profitability target after first-quarter earnings beat analyst estimates.

Pretax profits rose 21 per cent to £2.2 billion from the year-earlier period, surpassing the £2 billion average estimate of analysts.

The bank said losses from bad debts fell 59 per cent from a year ago to £177 million. As a result, it said it expects its net interest margin to exceed its 2.55 per cent annual target. The results bolster chief executive Antonio Horta- Osorio’s effort to return the bailed-out bank to full private ownership.

Since taking over in 2011, he’s cut assets, shrunk the retail network and eliminated thousands of jobs, allowing the lender to post its first annual profit in five years in 2014 and resume paying dividends.

The UK government has pledged to cut its 21 per cent stake after next week’s election by selling shares to individual investors. “We have made a strong start to the next phase of our strategy as we continue to support and benefit from UK economic growth,” Mr Horta-Osorio (51) said.

"I am confident that the successful delivery of our strategy through our simple, low risk, customer focused, UK retail and commercial banking business model" will boost returns to shareholders. The shares have increased about 2 per cent this year, while Royal Bank of Scotland declined 14 per cent. They closed at 77.38 pence in London on Thursday, above the 73.6 pence at which the government would break even on its shares.

Lloyds's net interest margin, the difference between its income from lending and cost of funding, widened to 2.65 per cent in the first quarter compared with 2.3 per cent in the year- earlier period. At RBS, the measure fell as mortgage margins shrank, the bank said on Thursday. "Improvements in the net interest margin reflect the disposal of lower margin run-off assets as well as the continued benefits of reduced funding and liability costs," chief financial officer George Culmer said in the statement.

Lloyds “has continued to strengthen its balance sheet. We have improved or reconfirmed all our guidance, and are well positioned for further progress in 2015.”

Pretax profit was £1.2 billion , including a £660 million charge linked to the sale of its TSB Banking Group unit to Banco de Sabadell. Revenue rose 3 percent to £4.6 billion from a year earlier, Lloyds said.

Bloomberg