Lloyds Banking Group posted £1.9bn in pre-tax profit in the third quarter, up from £576m for the same period a year ago, despite “mortgage and deposit pricing headwinds”.   

The business, which owns Halifax and Bank of Scotland, says its balances lifted by £1.4bn between July to September, including a £400m rise in its open mortgage book.

The results come after Barclays reported its third-quarter financials yesterday.  

Major UK banks have reported a run of strong profits buoyed by Bank of England base rate rises that have lifted 14 times since December 2021 to 5.25%.      

However, investors are concerned about tougher competition for savers’ cash and potential loan defaults in a cost-of-living crisis have weighed on the sector.  

Lloyds said its net interest margin of 3.08% in the third quarter — the difference between what it charges to borrowers and what it pays out to savers — “was down 6 basis points in the quarter given the expected mortgage and deposit pricing headwinds”.  

But the bank held to its full-year guidance, adding that arrears in its UK mortgage business were “broadly stable” in the period.  

Its third-quarter profit was in line with market expectations.  

Shares in the bank edged 1% higher to 40.9p in mid-morning trading.  

AJ Bell head of financial analysis Danni Hewson says: “The confidence in the full-year forecast came despite the net interest margin coming in a touch below expectations for the three-month period to 30 September, which may explain why there is some lingering scepticism reflected in the reaction to today’s statement.  

“Also notable was the relatively upbeat forecast for impairments — Lloyds, for now, managing to keep bad debts under some kind of control.   

“The key question for investors is how long the company can continue to enjoy some sort of benefit from the higher cost of borrowing and if or when the strain on household finances becomes so acute the level of loans gone bad starts to balloon.”  

Lloyds Banking Group chief executive Charlie Nunn adds: “Robust financial performance and strong capital generation in the first nine months of the year was driven by net income growth, cost discipline and resilient asset quality.”  

Several major UK banks post results this week. Santander UK also reports today, with Standard Chartered on Thursday and NatWest on Friday.