Lloyds Banking Group PLC (NYSE: LYG) reported third-quarter profit that beat market expectations, helped by growth in net interest income and fee income, and the bank maintained its full-year guidance.
For the three months ending September 30, net interest income at Lloyds Banking Group PLC (NYSE: LYG) came in at 拢3.8 billion (about $5.1 billion), up 10% year-on-year and in line with expectations. Pre-tax profit for the quarter was 拢2.33 billion, above the analyst average estimate of 拢2.29 billion.
Return on tangible equity for the third quarter was 19.5%, up from 17% in the second quarter. Total deposits stood at 拢502.8 billion, higher than 拢500.9 billion in the second quarter. The bank still expects operating costs below 拢9.9 billion in 2026.
Chief Executive Charlie Nunn said in a statement that the bank delivered "continued revenue growth, improving operating leverage and strong, stable credit performance."
Underlying impairment charges for the quarter rose to 拢313 million, up 78% year-on-year, reflecting a "deteriorating economic outlook" and the impact of higher interest rates. UK interest rates have held at 3.75% so far this year, but inflation concerns triggered by the Iran war have raised the possibility of further hikes.
Banks typically earn higher profits in a high-rate environment because the spread between loan interest and deposit interest widens. However, HSBC's disappointing outlook earlier this week showed that banks cannot always upgrade their performance forecasts on that basis.
Lloyds' year-on-year profit increase was particularly notable, after the bank booked an 拢800 million provision in the third quarter of 2025 to compensate customers who were misled into using car loans.
Lloyds is seeking to expand further into wealth management and insurance. The bank plans to increase investment in the corporate pension sector, competing with companies such as Aviva. Lloyds is also pushing more cross-selling, integrating wealth products and insurance into a more unified banking app. The Halifax household banking brand is also being merged into Lloyds' larger brand system.
According to presentation materials from earlier this year, the London-based bank plans to expand its corporate and investment banking business overseas to support clients' activities in the United States and broaden its European business footprint. The bank said it plans to bring existing capabilities into the US market.
On Wednesday, the UK government confirmed plans to raise banking taxes, but only for a limited period and by less than some had expected. Following the news, Lloyds Banking Group PLC (NYSE: LYG) and other UK bank shares rose at one point. After the earnings release, as of the time of writing, Lloyds' US-listed shares fell 3.8% in pre-market trading.
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