Lloyds Banking Group announce profit surge to £1.9bn as UK's biggest mortgage lender benefits from higher borrowing costs
Lloyds Banking Group, which controls Halifax and Bank of Scotland, has reported a surge in profits to £1.9bn as higher borrowing costs put customers under pressure
Finance giant Lloyds Banking Group has announced that profits have surged even higher to £1.9billion as the UK's biggest mortgage lender benefits from higher borrowing costs.
The Halifax and Bank of Scotland owner reported a pre-tax profit of £1.9bn for the three month to September. This is more than three times the revised amount from last year of £576million. It is also slightly ahead of analysts' expectations.
The mortgage lender took in £3.4bn of net interest income. This is the difference between what is paid out for deposits and what has been generated from loans. This again was up year-on-year. Mortgage customers have experienced crippling rates over the past year, with the interest rate of 5.25% pushing up the cost of borrowing. However, Lloyds has said that there has been little sign that customers are struggling with payments, with arrears stable and defaults in loan payment down.
Loan balances also grew to £1.4bn over the past year, while lending overall fell by £2.8bn from January 2023 to September 2023. According to the Lloyds, despite pressure on households with the cost of living, high inflation rates and high interest rates, household spending has increased in recent months.
William Chalmers, Lloyds’ chief financial officer, said: “You can see some pretty consistent and reasonable spend increases – it’s interesting, in our base, that is strongly in both travel and entertainment, as examples. So, not just the staples, but also customers choosing to spend money on discretionary uses too. I think it’s safe to say that, as a general matter, customers are adjusting to the times that we’re in.”
Chalmers added that more customers were also putting money into their savings, to take advantage of the higher interest rates. Around £3.9bn was put into savings, with £3.2bn of this coming directly from current accounts.
Charlie Nunn, the group chief executive of Lloyds, said: “Guided by our purpose, we remain focused on supporting our customers and helping them navigate the uncertain economic environment. The group continues to perform well. 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. This performance allows us to reaffirm our 2023 guidance.”
The announcement comes after competitor Barclays saw its share price fall. The bank had cut its forecast for the net interest margin and announced a 6% decrease in UK deposits, owing to greater competition on the market.