Lloyds Banking Group PLC (LSE:LLOY) backed its outlook for 2023, including UK margin guidance, as it reported better-than-expected profits and a fall in bad debts.
Charlie Nunn, chief executive, said: “The group continues to perform well. Robust financial performance and strong capital generation in the first nine months of the year was driven by net income growth, cost discipline and resilient asset quality. This performance allows us to reaffirm our 2023 guidance.”
The high street lender said pre-tax profit in the third quarter more than tripled to £1.89 billion, up from £576 million last year and ahead of the £1.77 billion consensus.
Net income edged up 1% to £4.51 billion from £4.48 billion with net interest income rising 1% to £3.44 billion from £3.39 billion.
Net interest margin of 3.08% was down 6 basis points (bps) on the previous quarter, given the expected mortgage and deposit pricing headwinds, but Lloyds held its full-year guidance for a banking net interest margin of greater than 310bps.
Lloyds’ results come a day after rival Barclays cut its outlook for margins in the UK this year, saying competition for deposits was heating up.
Lloyds held its full-year operating cost forecast of £9.1 billion, with the only change to guidance being slightly improved asset quality, which it now expects to be less than 30 basis points.
Operating costs in the third quarter rose 4% to £2.24 billion from £2.15 billion.
Loans to customers fell 1% to £452.1 billion while customer deposits dropped 3% to £470.3 billion but bad debt charges fell to £187 million from £668 million.
Lloyds reported a strong return on tangible equity of 16.9% while the CET1 ratio of 14.6% remains ahead of the ongoing c.12.5% target, plus management buffer of c.1%.