Higher interest rates drive bumper Lloyds profits

Lloyds has posted bumper profits as the UK's biggest mortgage lender continues to benefit from higher interest rates.

The banking group revealed a pre-tax profit of £1.9bn for the three months to September, up from £576m in the same period last year.

Lloyds, which also owns Halifax and Bank of Scotland, made £3.4bn in net interest income over the quarter.

But the figure was down slightly on the previous quarter as the bank paid more out to savers.

Lloyds' latest results follow concern that banks are raising borrowing rates much faster than they are savings rates, particularly for easy access accounts.

In February, Lloyds defended itself against criticism for not offering savers more.

Most banks have reported higher profits due to rising interest rates, as customers have to pay more to borrow cash for mortgages, loans and credit cards.

Since 2021 the Bank of England has repeatedly put up the UK's benchmark interest rate, which informs rates set by High Street lenders such as Lloyds, in a bid to tackle soaring consumer prices.

Rates were left unchanged at its last meeting in September, at 5.25%, but remain at their highest level since 2008, leaving homeowners and first-time buyers under pressure.

The average rate on a fixed two-year mortgage deal is currently 6.34%, according to financial information service Moneyfacts.

Under new rules brought in by the Financial Conduct Authority (FCA), banks must now prove they are offering their customers fair value.

Charlie Nunn, group chief executive, said in a trading statement on Wednesday that the bank remained "focused on supporting our customers and helping them navigate the uncertain economic environment".

Lloyds said it had seen more customers move cash out of current accounts and into savings accounts.

Some £11.1bn more was withdrawn from current accounts in September than the same month last year, it said, with the amount of cash put into savings accounts increasing by 5%.

Matt Britzman, equity analyst at Hargreaves Lansdown, said Lloyd's performance was helped by it managing to "keep hold of savers looking for better rates".

"As we've seen over recent quarters consumers are conscious of the rates they're receiving on current account deposits and are off in search of higher yields," he said.

"Consumers facing higher living costs may not be feeling any release of pressure, but they're managing finances well and remain remarkably resilient, with arrears levels stable."