Lloyds Banking Group has today reported a third-quarter profit that met forecasts and maintained its guidance for full-year performance, despite declining lending margins and rising costs that are squeezing British banks' returns.
Britain's biggest mortgage lender reported a pre-tax profit of £1.9 billion for the three months to September 30, in line with the £1.8 billion expected by analysts in forecasts compiled by the bank.
Most British banks have reported a run of strong profits as higher rates have lifted lending revenue. But investor concerns about tougher competition for savers' cash and potential loan defaults in a cost of living crisis have weighed on the sector.
The economic backdrop of rising prices and upward pressure on wages is also pushing banks' costs higher, with Lloyds reporting its operating costs have risen by 5% to £6.7 billion year to date due to inflation and strategic investments.
Barclays shares closed down 7% yesterday after it downgraded its margin forecast for the year and hinted at big cost-cutting plans to come.
Lloyds in contrast reaffirmed its performance guidance for the year and said it expected asset quality to be slightly better than forecast, at less than 30 basis points as opposed to around that level.
Analysts hailed the steady set of results by Lloyds, noting an impairment charge of just £187m - compared to £668m in the same quarter a year earlier - was much lower than expected.
Banks' rising profits have been checked this year by intensifying competition for deposits amid political pressure to improve saving rates, after lenders raised rates on borrowing at a much faster pace.
However, Lloyds said it increased its deposits by £500m during the third quarter, reversing a trend of outflows seen by many banks this year. Deposits remained down £5 billion year to date at £470 billion.
The bank did not make any unscheduled announcements on dividends or share buybacks for investors.
Lloyds' net interest margin - a measure of profitability that tracks the difference between what is made on lending and paid out on deposits - came in at 3.08%, down 6 basis points on the prior quarter.
Lloyds' quarterly profit for 2022 was restated lower due to accounting changes, the bank said.
