Lloyds Banking Group plc (LSE:LLOY) reported a 42% increase in statutory profit before tax to £6.63 billion for the first nine months of 2026, supported by higher interest income, continued lending growth and substantially lower remediation charges.
The UK banking group recorded statutory profit after tax of £4.84 billion, up 46% from £3.32 billion in the corresponding period last year, while earnings per share increased to 7.6 pence from 4.8 pence.
Third-quarter statutory pretax profit reached £2.33 billion, nearly doubling from £1.17 billion a year earlier.
Lloyds also reported a nine-month return on tangible equity of 17.9%, compared with 11.9% in the prior-year period, and reaffirmed its full-year financial guidance.
Pretax Profit Rises 42% as Income Growth Supports Earnings
Lloyds reported statutory profit before tax of £6.63 billion for the nine months ended 30 September 2026, compared with £4.68 billion a year earlier.
The increase reflected stronger income generation and lower remediation costs, partially offset by higher impairment charges and operating lease depreciation.
Underlying profit increased 36% to £6.58 billion from £4.85 billion.
Net income rose 9% to £14.82 billion, supported by growth in net interest income and other income.
The group’s cost-to-income ratio improved to 49.3% from 59.7%, reflecting higher income and lower total costs, including remediation.
For the third quarter alone, statutory profit before tax increased 99% to £2.33 billion.
Underlying profit rose 83% year on year to £2.37 billion, while net income increased 9% to £5.07 billion.
Quarterly earnings per share reached 2.8 pence, compared with 1.0 pence in the third quarter of 2025.
Net Interest Income Increases 10% to £11.1 Billion
Underlying net interest income increased 10% year on year to £11.08 billion during the first nine months of 2026.
The improvement reflected higher income from the group’s structural hedge arrangements, increased customer lending and growth in average interest-earning banking assets.
The banking net interest margin increased to 3.21%, compared with 3.04% in the corresponding period last year.
Average interest-earning banking assets rose 4% to £477.5 billion from £460.4 billion.
The group benefited from reinvesting maturing structural hedge positions at higher interest rates, although this was partly offset by mortgage margin compression and competition for customer deposits.
Third-quarter underlying net interest income reached £3.81 billion, up 10% year on year and 3% from the preceding quarter.
The quarterly banking net interest margin improved to 3.25%, compared with 3.22% in the second quarter.
Lloyds continues to expect full-year underlying net interest income to exceed £14.9 billion, with current market conditions indicating an outcome modestly above that level.
Other Income Grows 10% as Customer Activity Strengthens
Underlying other income increased 10% to £5.0 billion during the first nine months, compared with £4.53 billion a year earlier.
The increase reflected stronger customer activity, contributions from strategic investments and the addition of Lloyds Wealth.
Retail other income rose 10%, supported by UK Motor Finance fleet growth, higher average vehicle rental values and a gain associated with the securitisation of primarily legacy mortgages.
Insurance, Pensions and Investments recorded 14% growth in underlying other income, benefiting from Lloyds Wealth and its Workplace business.
However, higher general insurance claims, including those associated with an industry-wide subsidence event, partly offset these gains.
Commercial Banking other income declined 3%, as stronger transaction banking and loan markets activity was outweighed by lower markets income.
The group’s equity investment businesses recorded 29% growth, supported by Lloyds Living and gains within LDC.
Third-quarter underlying other income increased 8% year on year to £1.69 billion, although it declined 1% from the second quarter.
Customer Lending Reaches £495.5 Billion
Lloyds reported underlying loans and advances to customers of £495.5 billion at the end of September, an increase of £14.4 billion, or 3%, since the beginning of 2026.
Retail lending increased by £6.8 billion, including growth across UK mortgages, unsecured lending, motor finance and European retail operations.
Excluding the impact of a £1.8 billion securitisation of primarily legacy mortgages completed during the second quarter, Retail lending growth reached £8.6 billion.
Commercial Banking balances increased by £9.2 billion, reflecting stronger lending activity across Corporate and Institutional Banking and Business and Commercial Banking.
During the third quarter, total underlying loans increased by £4.0 billion, or £5.1 billion excluding central adjustments.
Customer deposits reached £502.8 billion, up £6.3 billion since December 2025.
Commercial Banking deposits increased by £9.6 billion, partially offset by a £3.7 billion decline in Retail deposits.
The group attributed the Retail reduction mainly to disciplined savings pricing amid a competitive deposit market.
Third-quarter customer deposits increased by £1.9 billion, supported by Commercial Banking growth.
Impairment Charges Increase but Credit Performance Remains Stable
Lloyds reported an underlying impairment charge of £930 million for the first nine months of 2026, compared with £618 million in the corresponding period last year.
The increase reflected updated credit models, lending growth, fewer provision releases and changes in the economic outlook.
The resulting asset quality ratio was 25 basis points, compared with 18 basis points a year earlier.
The nine-month impairment charge included £88 million associated with updated economic scenarios, compared with £27 million in 2025.
These adjustments reflected a less favourable economic outlook, including the impact of the Middle East conflict.
Third-quarter impairment charges reached £313 million, compared with £176 million a year earlier.
Despite the increase, Lloyds said arrears remained low and stable across its Retail and Commercial Banking portfolios.
The group maintained its full-year asset quality ratio guidance of approximately 25 basis points.
Operating Costs Rise 1% as Remediation Charges Decline
Operating costs increased 1% year on year to £7.25 billion during the first nine months of 2026.
The increase reflected business growth, inflationary pressures and costs associated with Lloyds Wealth.
These factors were largely offset by continued efficiency savings, lower severance expenses and stabilising investment expenditure.
Operating lease depreciation increased 17% to £1.26 billion, reflecting fleet growth, higher-value vehicles and a second-quarter charge related to lower used-car prices.
Remediation charges declined substantially to £61 million from £912 million a year earlier.
The previous year’s figure included an £800 million charge relating to potential motor finance commission redress.
Lloyds reported no further charges relating to motor finance commission arrangements during the first nine months of 2026.
However, the group continues to monitor legal challenges to the Financial Conduct Authority’s motor finance redress schemes.
Implementation of the schemes has been delayed, with an Upper Tribunal hearing scheduled for the second half of February 2027.
Lloyds said its existing provision continues to represent management’s current best estimate of the potential financial impact.
Capital Ratio Stands at 13.3% Following Shareholder Distributions
Lloyds reported a Common Equity Tier 1 (CET1) capital ratio of 13.3% at 30 September 2026.
The group generated 153 basis points of capital during the first nine months, including 45 basis points in the third quarter.
Capital generation was supported by banking profitability and an interim dividend received from the Insurance business, partially offset by higher risk-weighted assets.
Risk-weighted assets increased 5% to £247.4 billion, primarily reflecting lending growth.
The CET1 ratio incorporated the effects of ordinary dividend distributions, the share buyback announced in July and the acquisition of Curve.
Lloyds completed its £1.75 billion share buyback programme announced in January 2026, repurchasing approximately 1.7 billion ordinary shares.
A further buyback programme of up to £1.0 billion was launched in July, with approximately £200 million of shares repurchased by the end of September.
Tangible net assets per share stood at 55.4 pence, down from 57.0 pence at the end of June and December 2025.
The group continues to target a CET1 ratio of approximately 13.0% by the end of 2026.
Lloyds Prepares for Accelerate 2030 Strategy
Lloyds said its financial performance remained consistent with the objectives of its current strategic programme.
The group is preparing to begin implementing its next strategy, Accelerate 2030, as the existing strategic cycle approaches completion.
Chief Executive Officer Charlie Nunn highlighted the group’s financial performance and continued focus on supporting UK households and businesses.
“The Group is delivering sustained strength in financial performance, with continued income growth, improving operating leverage and strong and stable credit performance. Our differentiated business model is performing well and we are on track to meet our 2026 guidance. We are maintaining strategic delivery as we continue to focus on supporting UK households and businesses. As we near completion of our current strategic chapter, we are excited to begin executing on our new strategy, Accelerate 2030. This will ensure we can deliver continued, sustainable value for our customers and shareholders.”
The group also expects its structural hedge to continue supporting income growth.
Structural hedge income reached £5.2 billion during the first nine months of 2026, compared with £4.0 billion a year earlier.
Lloyds continues to forecast structural hedge earnings exceeding £7.0 billion in 2026 and £8.0 billion in 2027.
Lloyds Banking Group Outlook
Lloyds reaffirmed its financial guidance for the full year 2026 following the stronger nine-month performance.
The group continues to expect underlying net interest income of more than £14.9 billion and a cost-to-income ratio below 50%, including operating costs of less than £9.9 billion.
The asset quality ratio is expected to remain around 25 basis points.
Return on tangible equity is forecast to exceed 16%, while capital generation is expected to surpass 200 basis points, excluding capital distributions.
Lloyds also intends to reduce its CET1 ratio to approximately 13.0% by year-end.
Management expects continued support from structural hedge income and customer lending growth, while monitoring impairment trends, competitive deposit conditions and developments surrounding motor finance redress.
The group enters the final quarter of 2026 with its existing financial targets unchanged and preparations underway for the implementation of Accelerate 2030.
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