Lloyds Banking Group reveals stronger-than-expected earnings over third quarter
Lloyds Banking Group has revealed stronger-than-expected earnings over recent months, as the lender said it was seeing signs of improved confidence among consumers.
The banking giant reported a pre-tax profit of £1.8bn between July and September, about 2 per cent lower than the £1.9bn generated this time last year.
It nevertheless came in significantly ahead of the expectations of analysts, who had been anticipating a profit of about £1.6bn for the third quarter.
The bank said its underlying net interest income – meaning the amount it generates from loans minus what it pays out on savings – declined 6 per cent year on year.
This came as its customers continued to refinance their mortgages on to lower-rate deals, in line with UK interest rates starting to come down.
Meanwhile, Lloyds said its customers were showing increasing financial confidence as cost-of-living pressures continue to ease.
It revealed a 5 per cent increase in spending on non-essential items among its customers over the first nine months of the year, while average spending on energy bills dropped nearly 20 per cent.
The bank also highlighted that average spending on charitable giving was about a quarter higher than this time last year.
Charlie Nunn, Lloyds’ chief executive, said the bank was “making good progress on our strategy and remain on track to deliver higher, more sustainable returns” while “continuing to provide support to our customers”.
Richard Hunter, Head of Markets at interactive investor, commented: “Lloyds has kicked off the quarterly reporting season in unspectacular fashion, although there are signs of improving momentum as the year progresses.
"Most of the key metrics echo a similar theme – improving third quarter numbers compared to the previous, but with the cumulative performance in the nine months so far significantly shy of the corresponding period last year.
"This will not come as a major shock to investors given the strength of last year’s results, and there are some mitigating circumstances which account for most of the shortfall.”
The push towards an increasingly digital business will undoubtedly reap rewards in the coming years, but the associated costs such as branch closures and severance packages are currently resulting in something of a slog until the ultimate aim can be achieved, Mr Hunter said.
He continued: “Overall, these results do not shoot the lights out, but they do provide a large element of comfort that Lloyds continues on its positive direction of travel towards a more streamlined and digital business, underpinned by a healthy financial position.
"Moves into other income streams such as credit cards and insurance could well bolster its major mortgage revenue, and the group’s confirmation of its year-end targets is proof that the bank remains on track.
"The shares have reacted reasonably warmly to the results, adding to the gain of 49 per cent seen over the last year, which compares to a hike of 12.6 per cent for the wider FTSE100.”