Strong mortgage demand helps profits at Bank of Scotland owner Lloyds double

Bank of Scotland parent Lloyds Banking Group has seen profits beat expectations as bosses said the lender had benefited from the economic rebound following the easing of lockdown restrictions.

Pre-tax profits for the three months to the end of September nearly doubled to £2 billion compared with a year earlier. Over the first nine months of the year, this equates to a pre-tax profit haul of £5.9bn.

The UK's biggest mortgage lender said it enjoyed a boost as it released more cash to its balance sheet held back during the pandemic.

Lloyds, which also owns Scottish Widows, held back £1.2bn during the coronavirus crisis and has released £740 million, including £84m in the past three months due to "improvements to the macroeconomic outlook for the UK, combined with robust credit performance".

Lloyds Banking Group is one of Britain's big banks, the country's biggest mortgage lender and is also behind the Bank of Scotland and Scottish Widows brands. Picture: Ian Rutherford

The group also enjoyed strong growth in mortgage lending, which was up £2.7bn in the quarter, while deposits also rose.

Lloyds said it will see future revenues ahead of previous guidance, including return on tangible equity - a key measure in the sector - now expected to be more than 10 per cent.

Chief executive Charlie Nunn, who recently joined from HSBC, replacing Antonio Horta-Osorio, who is credited with turning around Lloyds’ fortunes in the wake of the financial crisis, said he will be unveiling a new strategic review, although he did not go into detail.

He added: "Building on the strengths of the group and its achievements in recent years, there are clearly significant opportunities for Lloyds Banking Group to further develop its platforms and capabilities and grow through disciplined investment."

John Moore, senior investment manager at wealth management firm Brewin Dolphin, said: “This is another positive set of results from Lloyds, with an improved outlook, higher income, and a stronger balance sheet all contributing to enhanced guidance for the year.

“The bank is in a solid position and the relatively positive outlook for the UK economy set out in [the] Budget will help it more than any of the other major banks, given its UK focus.”

Richard Hunter, head of markets at investment platform Interactive Investor, noted: “Lloyds has joined the merry throng of the UK banks in the current reporting season, with a further release of credit impairments and improved guidance outlook for the year.

“The improving performance within the UK economy, of which Lloyds is often seen as something of a bellwether, has enabled pre-tax profit in the quarter to double to £2bn from a year before, comfortably exceeding expectations.”

He added: “Less positively, there is still evidence of a cautious UK consumer continuing to pay down debt where possible, impacting lines such as credit card balances, where the margin is higher.”

Gary Greenwood, banking analyst at brokerage Shore Capital, added: “Lloyds has published Q3 results that show better-than-expected profitability. The capital position is also much stronger than expected, which bodes well for future shareholder distributions.”

Meanwhile, TSB, which is part of Spain’s Sabadell, has reported a year-to-date statutory pre-tax profit of £110.2m for the third quarter, compared to a loss of £152.4m a year earlier.

Chief executive Debbie Crosbie said: “By focusing on our customers and investing in the products, services and support they need, we’ve delivered another strong set of results this quarter.”

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