Lloyds Banking Group (LSE: LLOY) reported a sharp third-quarter profit on Thursday, hammered by the motor finance scandal. Pretax profit fell 36% to £1.2 billion, down from £1.8 billion in 2024. Year-to-date, Lloyds has earned £4.7 billion, nine% lower than the same period last year.
The bank nearly doubled its motor finance provisions, adding £800 million and taking the total to £2 billion. This charge shows how past mis-selling continues to hit profits hard and weighs heavily on shareholders.
Return on tangible equity dropped to 7.5% in the third quarter, down from 15.2% a year ago. Net interest income rose seven% to £3.5 billion, and customer deposits grew three% to £496.7 billion, but the scale of the redress costs overshadows these gains.
Lloyds expects operating costs to reach around £9.7 billion in 2025, while underlying net interest income is projected at £13.6 billion. The acquisition of Schroders Personal Wealth gives the bank complete control of around 60,000 clients with £17 billion in assets, supporting a bigger push into wealth management.
CEO Charlie Nunn highlighted “strong capital generation” and “strategic progress,” but also criticised the FCA. He warned the regulator’s proposals could take 20 years of profitability from the car finance sector and affect the attractiveness of UK investments.
Even with growth in income and deposits, regulatory missteps and past misconduct continue to hit profits, showing the cost of inconsistent oversight. Lloyds’ performance underlines the tension between shareholder returns and mounting redress obligations.