Lloyds Banking Group has reported a sharp 36% drop in third-quarter earnings after taking an extra £800 million charge to compensate customers who were unfairly sold car loans. The banking giant's pre-tax profit fell to £1.2 billion between July and September, down from £1.8 billion in the same period last year.
Despite the significant decline, the results exceeded analyst expectations who had forecast profits of around £1 billion. The additional charge brings Lloyds' total estimated compensation bill for motor finance issues to £1.95 billion.
Motor finance compensation scheme
The latest charge relates to the UK financial regulator's motor finance compensation scheme, which requires banks to pay back customers who were unfairly sold car loans. Lloyds has been setting aside increasing amounts of money to cover these potential costs as the scheme develops.
The bank continues to show resilience in other areas of its business, with lending growth across multiple sectors throughout 2025. This includes increases in mortgages, credit cards and motor finance products, demonstrating continued customer demand.
Business performance and growth
Current account and savings account balances have also grown this year as customers adjusted their spending habits, choosing to save more and spend less. This shift in customer behaviour has provided additional deposits for the bank to work with.
Chief executive Charlie Nunn emphasised the group's continued strong performance despite the motor finance setback. He said: "The group continues to perform well, demonstrating robust financial performance alongside strategic progress, including our recent acquisition of Schroders Personal Wealth."
Nunn highlighted that the bank benefited from income growth and cost savings "despite the impact of the additional motor finance charge in the third quarter". The acquisition of Schroders Personal Wealth represents part of Lloyds' broader strategic expansion plans.
Sources used: "PA Media" Note: This article has been created with Artificial Intelligence (AI).
