Lloyds reports profit increase as bank gets boost from higher rates

Lloyds Banking Group has revealed a near-doubling of its profits after getting more income from higher interest rates, a day after the Chancellor said he was hiking bank taxes to fund cost-of-living support.

The banking group, which includes the brands Lloyds and Bank of Scotland, reported a pre-tax profit of £2.3 billion for the third quarter.

This was almost double the £1.2 billion it made the same period a year ago.

Last year’s profit figure was affected by the group setting aside an extra £800 million provision to cover costs related to the UK watchdog’s motor finance scheme, to compensate people mis-sold a car loan.

The scheme is currently on hold while it faces legal challenges in court.

Stripping out that impact, earnings still strengthened year-on-year with Lloyds generating more income during the quarter.

Underlying net interest income, which shows the difference between what banks make from loans and what they pay out on deposits, jumped by 10% year-on-year.

Lloyds’ results come a day after the Chancellor announced in his autumn Budget statement that banks would have to pay a temporary extra 3% on their corporation tax surcharge, double the current rate from January.

John Healey said he was asking “a bit more of our banks to support ordinary people”, with the extra money raised set to help fund support for household energy bills.

The measure is expected to raise an extra £1.5 billion for the Treasury over the 15 months it is in place, according to the Office for Budget Responsibility.