Lloyds ups guidance after Q3 beats forecasts

Lloyds Banking Group improved its full-year guidance after bad-debt writebacks helped results beat expectations in the third quarter.

Pretax profit for the three months to the end of September rose to £2.03bn from £1.04bn a year earlier as net income increased 20% to £4.08bn. The bank released £84m of impaired loans compared with a charge of £301m a year earlier.

Analysts had on average expected third-quarter profit to come in at £1.35bn. Lloyds' capital strength was also better than expected with a common equity tier 1 ratio of 17.2% compared with analysts' average forecast for 16.3%.

In the first nine months of 2021 pretax profit surged to £5.93bn from £434m as net income rose 8% to £11.64bn. The FTSE 100 bank recorded a £740m impairment credit compared with a £4.12bn charge a year earlier.

Lloyds said based on its performance and the improved UK economic outlook it expected its 2021 net interest margin to be slightly above 250 basis points and for operating costs to be about £7.6bn. Impairments will be a net credit and the return on tangible net equity will exceed 10% excluding a benefit from tax rate changes. The bank had previously said the net interest margin would be about 250 basis points and return on equity would be close to 10%.

Charlie Nunn, who took over as chief executive in August, said: "There are clearly significant opportunities for Lloyds Banking Group to further develop its platforms and capabilities and grow through disciplined investment. As we move into the final quarter of 2021, the board, group executive committee and I are developing the next evolution of our strategy and longer-term priorities."

Gary Greenwood, an analyst at Shore Capital, said he expected the consensus estimate for annual pretax profit to rise from £6.21bn to about £6.9bn based on Thursday's trading statement.

"We view the outlook as positive give the solid macroeconomic backdrop and expectation of rising interest rates," Greenwood said. "The capital position is also much stronger than expected, which bodes well for future shareholder distributions, and we continue to think a sizeable share buyback will be announced alongside the full year results in February."

Lloyds shares rose 1.5% to 49.7p at 09:35 BST.