Lloyds Banking Group PLC (LSE:LLOY) turned in a cleaner, stronger set of third-quarter numbers, with profits comfortably ahead of expectations and balance sheet trends improving across the board.
UBS lifted its price target to 90p from 80p but kept a Neutral rating, arguing that while the bank is performing well, the valuation already reflects much of the good news.
Pre-tax profit excluding one-off remediation charges came in 11% above consensus, driven by slightly better income, tighter costs and lower-than-expected loan losses.
Net interest income was 1% ahead, helped by steady lending volumes and a net interest margin of 3.06%, in line with forecasts. Other income rose 9% on the year, while costs were 2% lower, producing a 4% beat on pre-provision profit.
Credit impairments were 42% below expectations at just 15 basis points, helping to lift earnings per share forecasts by 3–6%. The core equity tier one ratio stood at 13.8%, matching market expectations.
UBS said the results showed “good momentum” in loans, deposits and non-interest income. Lending increased 1.3% in the quarter, deposits rose 0.6%, and the mix continued to improve.
The bank’s structural hedge added four basis points to margin in the quarter and is expected to contribute twice that in the fourth quarter, with hedge income forecast to rise by £1.2bn next year.
Management tweaked its 2025 guidance slightly: underlying net interest income is now expected to be about £13.6bn, operating costs around £9.7bn, and credit losses nearer 20 basis points than 25.
The group also nudged up its return on tangible equity forecast, excluding its motor finance business, to about 14%. Its 2026 goals, including a cost-to-income ratio below 50% and a return on equity above 15%, remain unchanged.
UBS values the shares at 9.1 times forecast 2026 earnings and 1.5 times tangible book, implying a 15.8% return on equity. With the stock at 86p, the 90p target suggests limited upside for now.
For all that, Lloyds appears to be executing steadily, with loan growth returning, deposit flows stabilising and costs kept in check.
After several choppy years, the UK’s biggest high street lender looks to be getting back to business as usual — just without much excitement in the share price yet.