Lloyd's (LYG.US) Q3 profit before tax exceeded expectations, impairment charges soared 78% year over year

The Zhitong Finance App learned that Lloyd's (LYG.US) profit for the third quarter exceeded market expectations, mainly due to the increase in net interest income and expense revenue, and the bank also maintained full-year performance guidelines. According to the data, in the three months ending September 30, Lloyd's net interest income was 3.8 billion pounds (about 5.1 billion US dollars), up 10% year over year, in line with expectations; profit before tax for the quarter was 2.33 billion pounds, higher than analysts' average forecast of 2.29 billion pounds.

The return on tangible equity in the third quarter was 19.5%, up from 17% in the second quarter; total deposits were £502.8 billion, up from £509 billion in the second quarter. The bank still anticipates operating costs of less than £9.9 billion in 2026.

CEO Charlie Nunn said in a statement that the bank's “revenue continues to grow, operating leverage continues to improve, and credit performance is strong and stable.” Underlying impairment charges for the quarter rose to £313 million, up 78% year over year, reflecting the impact of “deteriorating economic prospects” and rising interest rates.

UK interest rates have remained at 3.75% since this year, but concerns about inflation caused by the Iran war have raised the possibility of further rate hikes. Banks are generally more profitable in a high interest rate environment because the spread between interest on loans and interest on deposits widens — but the disappointing outlook from HSBC Holdings earlier this week suggests that banks are not always able to raise performance expectations as a result.

Lloyd's profit increased particularly significantly year over year, after the bank made provision of £800 million in the third quarter of 2025 to compensate customers who were misled into using car loans.

Lloyd's is looking to further expand its wealth management and insurance business. The bank plans to increase investment in corporate pensions and compete with Aviva and other companies. Lloyd's is also promoting more cross-selling and integrating wealth products and insurance into more integrated banking apps. Family banking brand Halifax is also being incorporated into Lloyds's 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 US and broaden the European business layout. The bank said it plans to introduce existing capabilities into the US market.

On Wednesday, the UK government confirmed plans to raise banking taxes, but only for a while, and the increase was less than some expected. Affected by this news, Lloyd's and other Bank of England stocks rose for a while.

After the financial report was announced, Lloyd's US stocks fell 3.8% before the market.