Lloyds Banking Group (LON:LLOY) reported a 36% drop in statutory profit after tax to £778 million for the third quarter of 2025, compared to £1.33 billion in the same period last year.
The decline was primarily attributed to an £800 million charge related to potential motor finance commission arrangements.
Underlying profit before impairment also saw a significant decrease, falling 28% to £1.47 billion. This was due to the motor finance charge and a higher underlying impairment charge.
Despite the profit dip, underlying net interest income rose 7% to £3.45 billion, reflecting a banking net interest margin of 3.06%, up 11 basis points year-on-year. Underlying other income also increased by 9% to £1.56 billion, driven by stronger customer activity.
The bank's balance sheet showed positive signs, with underlying loans and advances to customers increasing by £6.1 billion in the third quarter and customer deposits growing by £2.8 billion. The CET1 ratio, a key measure of financial strength, remained stable at 13.8%.
The motor finance provision now totals £1.95 billion, representing the Group's estimate of the potential impact. The FCA's consultation on an industry-wide redress scheme suggests a potentially adverse outcome for Lloyds, leading to the increased provision.
Despite the challenges, Lloyds revised its 2025 guidance, now expecting underlying net interest income of approximately £13.6 billion. The return on tangible equity is projected to be around 12%, or 14% excluding the motor finance charge.
Key Drivers:
- Net Interest Margin: Improvement driven by structural hedge contribution, offsetting mortgage refinancing pressures.
- Customer Activity: Stronger activity boosting other income, particularly in Retail and Equity Investments.
- Lending Growth: Continued growth in loans and advances, primarily in UK mortgages and unsecured lending.
Charlie Nunn, Group Chief Executive, stated, “The Group continues to perform well, demonstrating robust financial performance alongside strategic progress, including our recent acquisition of Schroders Personal Wealth.”
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