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Investing.com -- Lloyds Banking Group reported a sharp drop in third-quarter profit and lowered its annual guidance, as costs tied to the motor-finance mis-selling scandal weighed on results.
Pretax profit for the July–September period fell 36% to £1.17 billion ($1.57 billion) from £1.8 billion a year earlier, broadly matching analyst expectations of around £1 billion. Year-to-date profit slipped to £4.7 billion, compared with £5.1 billion in the same period of 2024.
The decline followed the lender’s decision earlier this month to increase its provisions for customer compensation by £800 million, taking the total set aside for the scandal to £2 billion. The charge significantly reduced profitability in the latest quarter, with return on tangible equity dropping to 7.5% from 15.2% a year earlier.
Lloyds’ net interest income, however, rose 7% in the quarter to £3.5 billion, supported by higher lending margins.
Still, the bank said the compensation impact means it now expects a full-year return on tangible equity of about 12%, down from its earlier forecast of 13.5%.
Operating costs are projected to reach around £9.7 billion for the year.
Lloyds CEO Charlie Nunn said the lender achieved income growth and cost efficiencies “despite the impact of the additional motor finance charge in the third quarter.”