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By Iain Withers and Sinead Cruise
LONDON, Oct 29 (Reuters) - Lloyds Banking Group
posted forecast-beating third quarter profit on Thursday,
cashing in on a coronavirus-driven boom in demand for mortgages
as it lowered its provisions for expected bad loans due to the
pandemic.
Britain's biggest domestic lender reported pre-tax profits
of 1 billion pounds ($1.3 billion) for the July-September
period, well ahead of the 588 million pounds average of
analysts' forecasts.
It booked new mortgage lending of 3.5 billion pounds after
receiving the biggest surge in quarterly applications since 2008
- equal to 22% of the UK market share for approvals - as a cut
in property transaction taxes and pent-up demand boosted
activity.
In September, the number of house purchases in Britain rose
21%, taking the total number of sales close to their
pre-pandemic level.
Lloyds set aside a further 301 million pounds to cover
expected customer loan defaults, less than half the 721 million
pounds analysts had expected.
Like its rivals, Lloyds' profits have been squeezed this
year by provisions for expected bad debts due to the coronavirus
crisis and rock-bottom interest rates.
Net income for the first nine months of 2020 tumbled 17% to
10.8 billion pounds, with 3.4 billion pounds booked in the third
quarter.
But echoing HSBC and Barclays results in
recent days, Lloyds' latest quarterly provision for loan
defaults was back in line with pre-crisis levels - though it did
flag unpredictable times ahead.
"The outlook remains highly uncertain given the second wave
of coronavirus, government response including social distancing
measures and end of furlough scheme, together with ongoing
Brexit negotiations," Lloyds said.
The bank said full-year loan loss provisions are expected to
be at the lower end of the 4.5 billion pound to 5.5 billion
pound range previously given. It has set aside 4.1 billion so
far this year.
Its net interest margin - the difference between the money
it makes on lending and pays out on deposits - rose to 2.42%, up
from 2.4% last quarter.
Lloyds has granted around 1.2 million retail payment
holidays on 69 billion pounds of lending to help ease financial
pressure on customers hard hit by the pandemic.
Around 73,000 borrowers are still benefitting from a first
payment freeze, while around 142,000 customers have requested
extended relief on 9.8 billion pounds of loans.
Retail current accounts continued to increase ahead of the
market in the third quarter, with group deposits up by 35
billion pounds over the first nine months of 2020, which Lloyds
said would help it to lend strongly into the recovery.
Its core capital ratio, a key measure of financial strength,
increased to 15.2%, compared to 14.6% at the half-year.
($1 = 0.7673 pounds)
(Editing by Rachel Armstrong and John Stonestreet)
