Lloyds Bank's profit surges on higher borrowing costs

The lender took in £3.4bn in net interest income, up on the year before.

However, it recorded a slight slowdown in its net interest margin in the latest quarter, compared with the three months to June, as it took in less cash from loans and paid out more to savers.

Lloyds said it had seen a shift in customer deposits, with more people moving cash out of current accounts and into savings, which typically give savers higher returns.

Some £3.2bn was taken out of current account deposits and £3.9bn put into savings, the bank revealed.

Group chief executive Charlie Nunn 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.”

Richard Hunter, Head of Markets at interactive investor, commented: “Lloyds is making a good fist of performing within a difficult environment, with its underlying financial strength underpinning progress.

"The Net Interest Margin (NIM) shock which plagued Barclays and inevitably read across to the other UK banks has unsurprisingly been echoed in the Lloyds numbers, although some of the sting may already have been taken out.

"For the quarter, NIM reduced to 3.08 per cent on mortgage and deposit pricing headwinds, which compares to a number for the first half of 3.18 per cent and 3.14 per cent in the previous quarter.

"Lloyds has retained its guidance on the outlook for the year at 3.1 per cent, which suggests that some stability has returned.”

"The group has backed its full-year guidance, but pockets of doubt remain. As with its competitors, there has been a limited exodus as savers chase higher rates elsewhere in an increased interest rate environment.

"For Lloyds, outflows from its current account balances of £9.4bn reflect this backdrop, although the number has been partially offset by customers choosing to stick with Lloyds, such that its increase in wealth and savings balances has increased by £5.2bn.

Mr Hunter added: “ Despite its own valiant efforts, Lloyds has suffered from factors beyond its control.

"The banking turmoil earlier in the year and the highly uncertain outlook for UK economic prospects have weighed on the share price, which has fallen by 17 per cent over the last six months.

"Over the last year, the loss is more contained, with the shares having dipped by 5 per cent, although this compares unfavourably with a gain of 5.4 per cent for the wider FTSE100 over that period. Market consensus more recently has also cooled on what could be a turbulent time to come.”