Lloyds Profits Double to £2.3 Billion Amid Bank Tax Hike

Lloyds Banking Group reported a third-quarter pre-tax profit of £2.3 billion, nearly doubling the £1.2 billion earned during the same period last year. The growth was driven by a 10% increase in underlying net interest income resulting from higher interest rates and lending growth, alongside a reduction in operating costs to £2.37 billion. Previous year figures had been suppressed by an £800 million provision for a motor finance compensation scheme currently under legal challenge.

Despite beating profit expectations, shares fell between 3% and 6% in early trading on Thursday. Investors reacted to a muted outlook and a lack of upgraded performance targets. The bank noted that competition in the deposit market, particularly from non-UK banks, is beginning to squeeze margins.

These results coincide with an autumn Budget statement by Chancellor John Healey, who announced a temporary increase in the bank corporation tax surcharge from 3% to 6% starting in January. The measure is expected to raise £1.5 billion for the Treasury over 15 months to fund household energy bills. In response to the evolving landscape, CEO Charlie Nunn outlined the Accelerate 2030 strategy, which targets £2 billion in cost savings by 2030 through the implementation of AI and other efficiency measures.