Lloyds Banking Group plc Sponsored ADR (LYG.US) Q3 profits fall below expectations, but full-year net interest income guidance raised despite additional provisioning pressure.

Lloyds Banking Group plc Sponsored ADR (LYG.US) has raised its full-year net interest income forecast, even though the bank expects the UK economic growth to slow down and its third-quarter profit to fall more than expected. The financial report shows that Lloyds Banking Group plc Sponsored ADR's Q3 net profit was GBP 4.64 billion, a 7% increase year-on-year; net interest income was GBP 3.45 billion, a 7% increase year-on-year. However, Q3 pre-tax profit fell by 36% year-on-year to GBP 1.17 billion, lower than the analysts' average expectation of GBP 1.45 billion. Nevertheless, Lloyds Banking Group plc Sponsored ADR currently expects the full-year net interest income for 2025 to reach GBP 13.6 billion, higher than the previous forecast of GBP 13.5 billion. Although the bank assumes a slow UK economic growth, a moderate pace of interest rate cuts is generally favorable for banks' profitability. At the same time, if not for adding an additional GBP 800 million in provisions for compensating customers who were mis-sold car loans in the third quarter, Lloyds Banking Group plc Sponsored ADR would have raised its full-year return on tangible equity (ROTE) expectations. Lloyds Banking Group plc Sponsored ADR CEO Charlie Nunn stated in a release, "Despite the impact of additional car finance provisions in the third quarter, in the first nine months of 2025, we have continued to deliver strong capital generation through income growth, cost control, and strong asset quality." As the UK's largest mortgage lender, Lloyds Banking Group plc Sponsored ADR points out that despite inflation pressures and a weak job market in the UK, overall customer resilience remains strong. Additionally, as the UK's largest car finance provider, Lloyds Banking Group plc Sponsored ADR announced last week an additional GBP 800 million provision to compensate customers who were mis-sold car loans. Thus far, this UK bank has accumulated provisions of GBP 1.95 billion, covering compensation and operating costs. It is worth mentioning that Barclays PLC Sponsored ADR (BCS.US) has also become the latest UK bank to add provisions to compensate customers who were not adequately informed about dealer commission details during the car financing process. Lloyds Banking Group plc Sponsored ADR, Barclays PLC Sponsored ADR, and other institutions state that the compensation plan proposed by the UK Financial Conduct Authority (FCA) earlier this month exceeds their understanding of a key court ruling, believing that the refund amount is disproportionate to the actual losses suffered by customers. In August, the UK Supreme Court ruled that banks should only pay compensation when the most serious breaches are found. At that time, many bank analysts and investors believed that the ruling provided significant relief for lending institutions. FCA CEO Nikhil Rathi stated that the regulator's plan will handle this issue in an orderly, efficient, and consistent manner, rather than resolving it on a case-by-case basis through banks, financial ombudsman services, and courts.