Lloyds Banking Group has reported a sharp 36% drop in third-quarter profits after setting aside a further £800 million to compensate customers affected by the UK motor finance mis‑selling scandal.
Between July and September, the bank posted pre‑tax profits of £1.17 billion, down from £1.8 billion a year earlier but above analyst forecasts of around £1 billion. The additional provision brings Lloyds’ total compensation costs to nearly £2 billion, following the Financial Conduct Authority’s proposals for a redress scheme covering around 14 million car finance agreements issued unfairly to consumers.
William Chalmers, Lloyds’ finance director, criticised the regulator’s approach as “disproportionate” to the level of harm suffered, cautioning that the proposed scheme risked producing “anomalous outcomes” for some customers.
Despite the hit, Lloyds’ underlying business remained resilient. The group recorded a 7% rise in quarterly net interest income to £3.5 billion, supported by lending growth across mortgages and consumer credit. Customer deposits grew by 3% to £496.7 billion, reflecting higher savings levels as households tightened spending during the year.
Lloyds also reaffirmed its full‑year outlook, projecting underlying net interest income of about £13.6 billion and operating costs near £9.7 billion. However, its return on tangible equity fell sharply to 7.5%, down from 15.2% a year earlier, as the one‑off charge weighed heavily on profitability.
Chief executive Charlie Nunn said the group had delivered “solid progress” despite the financial setback, citing income growth, cost efficiencies, and strategic milestones such as taking full ownership of Schroders Personal Wealth to expand its presence in the UK wealth market. He added that Lloyds remained confident in its long‑term earnings outlook into 2026.
