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Lloyds Banking Group’s profits tumbled almost 40 per cent to £1.2bn in the third quarter, as the bank took an £800mn charge linked to the car finance mis-selling scandal.
The UK high-street lender had already disclosed that it would take the £800mn hit this quarter from the long-running car finance probe, meaning that profits were better than the £1bn analysts had expected.
But pre-tax profits were 36 per cent lower than the £1.8bn the bank generated in the same period last year, and the £2bn it reported in the previous quarter.
Lloyds disclosed the extra charge to cover redress payments for the motor finance scandal earlier this month, after the Financial Conduct Authority set out details of its compensation scheme. Lloyds, which is the biggest provider of motor loans through its Black Horse business, has now made total provisions of £1.95bn for the scandal.
William Chalmers, the group’s chief financial officer, said Lloyds was in discussions with the FCA as part of the regulator’s consultation on the redress scheme.
The finance chief said the current scheme risked “producing anomalous outcomes for customers” and that its calculation for harm was unclear and too broad. Lloyds believed the scheme was inconsistent with previous Supreme Court rulings on the scandal, he said.
The car finance hit offset an increase in third-quarter net revenues to £4.6bn, up from £4.3bn over the same period last year. In the three months to June, the bank brought in £4.5bn. The boost was driven by growth in lending for mortgages, credit cards and unsecured loans.
Lloyds recognised £176mn in underlying impairments for the quarter, broadly in line with last year. But the deterioration was confined to the bank’s retail customers, with business customers now in a better position than the bank had expected.
Lloyds shares were flat in early trading.
The bank is in the final phase of a plan launched in 2022 by chief executive Charlie Nunn to generate more income that is less closely tied to the interest rate cycle.
This month, the Financial Times reported that Lloyds was assuming full control of Schroders Personal Wealth, its joint venture with the asset manager, as it targets the mass-affluent market. Chalmers said Lloyds was planning to find cost reductions across the two business as well as expand its offering to Lloyds customers.
Lloyds, which is often seen as a bellwether for the UK economy, forecast UK GDP growth of 1.3 per cent this year and 1 per cent next year.
Nunn said the group had continued to perform well and was making progress on its strategy.
“Strong capital generation was supported by income growth, cost discipline and strong asset quality in the first nine months of 2025, despite the impact of the additional motor finance charge in the third quarter.”
Nunn has also tried to digitise the bank’s operations and cut costs. In September, the FT reported the bank was overhauling its performance review system to shed underperforming staff.
