Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Lloyds reported better than expected earnings in the third quarter as customers took advantage of lower interest rates to borrow more.
The bank said on Wednesday that lending had been boosted by a pick-up in credit card use and unsecured loans, while its mortgage book grew by £3.2bn in the quarter.
Lloyds announced statutory profits before tax of £1.8bn in the period, above market expectations of £1.6bn and down slightly from £1.9bn the previous year.
Chief executive Charlie Nunn reaffirmed the group’s guidance that net interest margin should be higher than 2.9 per cent this year as he flagged “growth in income alongside continued cost discipline and strong asset quality.”
UK house prices and transactions have been rising as the fall in mortgage rates has given buyers more confidence. The Bank of England cut its benchmark rate to 5 per cent in August while UK house sales rose in September at their fastest rate since the post-pandemic rebound.
Lloyds’ net interest margin — the difference between the interest it charges on loans and the rate it pays on customer deposits — rose on the previous quarter to 2.95 per cent as it benefited from a so-called structural hedge that protects it against falling interest rates.
The UK bank said current account balances had fallen by £1.1bn in the quarter, a smaller decrease than in the previous quarter as the trend of customers moving their money to chase better savings rates eased.
Lloyds’ impairment charge for potential bad loans fell to 172mn, from £187mn in the same period last year, as it noted “resilient credit performance” but wrote back a “one-off” debt sale of £77mn.
The high-street lender expects a return on tangible equity — a key measure of profitability — of about 13 per cent this year.
https://www.ft.com/content/ae54bc84-3656-49fd-8959-e83bc9c6c74b
