- Lloyds posted pre-tax profits of £1.86bn for the three months ending September
- Profits were up more than threefold from the restated £576m made last year
- On a nine-month basis, though, turnover increased by over £900m to £13.7bn
Lloyds Banking Group slightly surpassed profit expectations in the third quarter following a significant decline in impairment charges.
The banking giant posted pre-tax profits of £1.86billion for the three months ending September, up more than threefold from the £576million made last year, which was restated because of accounting changes, and above the £1.8billion forecast by analysts.
Just £187million in loan loss provisions was set aside by the business, compared to £668million in the equivalent period in 2022 and £419million in the previous quarter, which it attributed to ‘broadly stable credit trends and resilient asset quality.’
Good result: Lloyds Banking Group posted pre-tax profits of £1.86billion for the three months ending September, up more than threefold from the restated £576million made last year
Net income remained relatively flat at £4.5billion due to higher payouts to savers, lower customer deposits and slightly weaker mortgage rates.
However, on a nine-month basis, revenue increased by more than £900million to £13.7billion, even as loan volumes dipped following the bank’s exit from a legacy portfolio of retail mortgages.
Thanks partly to the Bank of England’s continuing interest rate hikes, the London-listed group’s net interest margin – the difference between what lenders charge borrowers and pay savers and a key measure of profitability – totalled 3.15 per cent, a 31 basis point rise on the previous year.
Combined with modest growth in operating expenses and falling volatility-related costs, pre-tax profits from January to September soared by £2billion to £5.7billion.
Consequently, the company has upheld its annual guidance, which includes a return on tangible equity exceeding 14 per cent and a banking net interest margin of over 310 basis points.
Charlie Nunn, chief executive of Lloyds, said: ‘Robust financial performance and strong capital generation in the first nine months of the year was driven by net income growth, cost discipline and resilient asset quality.’
Lloyds’s results arrive a day after Barclays reported its third-quarter profits fell to £1.9billion largely because of a weaker performance by its investment banking operation.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: ‘After Barclays’ mixed set of results saw a sell-off of banks yesterday, Lloyds’ update should provide some reassurance about the sector’s resilience.’
She added: ‘There are no surprises in today’s update, which should assuage the market, and Lloyds appears to be holding onto cash for any opportunities that emerge in the coming months.’
Both Barclays and Lloyds have received criticism for closing dozens of high street branches this year as many Britons, particularly the elderly, rely on them to access financial services.
The former firm is set to shut about 180 physical outlets in 2023, while the latter is expected to axe 155 and has another 75 earmarked for closure next year.
Last month, Lloyds said 18 Lloyds branches, as well as 15 Halifax locations and two Bank of Scotland sites, would shut their doors between January and September 2024.
It comes as the company mandates staff attend the office on at least two days per week as part of a measure to improve productivity.
Lloyds Banking Group shares were 1 per cent, or 0.4p, down at 40.2p in early trading and have fallen by approximately 14 per cent since the year began.
