BANK of Scotland owner Lloyds Banking Group has flagged increased concern about the effect Brexit uncertainty may have on the economy as it reported an eight per cent rise in underlying profits to £2.2 billion for the first quarter of the year.

Lloyds, the UK’s biggest mortgage lender, has until now generally been sanguine about the effects of Brexit on the economy. But chief executive Antonio Horta-Osorio said this morning that, while the bank is performing strongly and had reaffirmed all of its financial targets, the ongoing uncertainty around the UK’s exit from the European Union “could further impact the economy”.

Lloyds said there was no deterioration in customer credit risk in the three months to March 31 as net income increased by 2% to £4.4 billion.

Net interest margin, a key performance measure, was 2.91% for the period, down from 2.93% in the first quarter of 2018, but ahead of the 1.89% reported by Royal Bank of Scotland for its opening three months of 2019 last week.

Royal cited the effects of tough competition in the mortgage market. Lloyds’ open mortgage book stood at £264.1bn at March 31, down from £266.6bn at December 31 and £266.7bn at March 31 last year.