Lloyds Reports Profit Down 36%

Lloyds Banking Group said its third-quarter profit fell 36% and that it downgraded its performance guidance for the year, hurt by a previously announced £800 million charge to compensate customers affected by the motor-finance mis-selling scandal, Lawrence White reported for Reuters.

Britain’s biggest mortgage lender said the impact of compensating customers under the probe meant it now expects a return on tangible equity of around 12% this year. (Photo: Lloyds Banking Group)

The British lender reported pretax profit for the July–September period of £1.17 billion ($1.57 billion), down from £1.8 billion a year earlier and broadly in line with analysts’ forecasts of around £1 billion.

Britain’s biggest mortgage lender said the impact of compensating customers under the probe meant it now expects a return on tangible equity of around 12% this year, down from previous guidance of 13.5%.

The British lender reported pretax profit for the July–September period of £1.17 billion ($1.57 billion), down from £1.8 billion a year earlier and broadly in line with analysts’ forecasts of around £1 billion.

Britain’s biggest mortgage lender said the impact of compensating customers under the probe meant it now expects a return on tangible equity of around 12% this year, down from previous guidance of 13.5%.

Lloyds — one of the country’s biggest players in the motor finance industry — announced on Oct. 13 that it had set aside an additional £800 million after the Financial Conduct Authority’s (FCA) proposed redress scheme showed that more historical cases dating back to 2007 were likely eligible for compensation.

That brought the bank’s total provisions for the motor finance scandal to £1.95 billion.

Lloyds said it would challenge the regulator’s methodology, further prolonging uncertainty around the final cost of what is likely to end as one of Britain’s most expensive consumer scandals in the banking industry.