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A booming mortgage market and an economic recovery that made it less likely that Covid-hit borrowers would default on loans helped Lloyds Banking Group double its profits in the three months to September.
The group, which owns Halifax and is the UK’s largest mortgage lender, benefited from an increase in demand for larger homes linked to the pandemic “race for space”, and last-ditch efforts by consumers to take advantage of the stamp duty holiday, which finished last month after reducing at the end of June.
There was a £2.7bn net increase in its home loans in the quarter, bringing mortgage lending to £15.3bn over the nine months to September – the strongest rise in that measure at the bank in more than a decade.
It contributed to a 96% rise in pre-tax profits to £2bn in the third quarter compared with £1bn a year earlier. That beat average analyst estimates of £1.3bn.
The UK’s improving economic outlook, which has been driven in part by the success of the Covid-19 vaccination programme, also meant the bank could release another £84m from a cash pile that had been earmarked for potential loan defaults triggered by the pandemic.
That compares with the £301m it put aside during the same period last year, and the £253m charge expected by City analysts. Lloyds has released £740m in loan loss provisions so far this year.
Commenting on his first set of results since taking over as chief executive, Charlie Nunn said he saw “significant opportunities” for Lloyds to develop and grow, including through “disciplined investment”. It comes as the lender takes a larger interest in wealth management.
“This can be built on the foundation strengths of customer service, distribution, and cost management. As we move into the final quarter of 2021, the board, group executive committee and I are developing the next evolution of our strategy and longer-term priorities,” Nunn added.
The new chief executive is expected to unveil the bank’s new multiyear strategic plan in the new year.
Nunn joined the bank after a nine-year career at the high street rival HSBC, where he last served as the global head of personal banking and wealth management. His appointment completed a top-level shake-up at Lloyds, which replaced its finance chief in 2019 and appointed Robin Budenberg as chairman, replacing Lord Blackwell, in January this year.
Nunn’s predecessor António Horta-Osório, who led the bank for a decade, left at the end of April to join Credit Suisse, where he is now chairman of the Swiss lender.