LONDON, May 3 Reuters Interest rate rises helped British bank Lloyds beat first quarter profit forecasts on Wednesday, but early signs of stress among some borrowers pointed to tougher times ahead.

Britain39;s biggest mortgage lender39;s results highlighted how the same increases in rates that have lifted its profit margins are also piling pressure on its weakest customers, already contending with the highest inflation rate in western Europe.

Lloyds reported pretax profit of 2.3 billion pounds 2.9 billion for the first three months of 2023, above the 1.95 billion pounds average of analyst forecasts compiled by the bank and up from 1.5 billion pounds the prior year.

While the asset quality of banks has proved resilient during the COVID19 pandemic and recent spiralling consumer prices, Lloyds said it had begun to see more loans run into difficulty.

Lloyds made a provision of 243 million pounds in the first quarter to cover potential losses after reporting modest rises in arrears, mainly in commercial banking loans and mortgages. It set aside 177 million pounds in the same period a year ago.

The bank39;s shares edged down 0.4 in early trading, compared to a 0.5 rise in the European banking stocks index.

The Bank of England has hiked rates from a rockbottom 0.25 in December 2021 to 4.25, enabling banks to prosper as they lent money at more profitable rates.

While earnings have exceeded expectations across the sector, Lloyds has echoed rivals in keeping fullyear…