FTSE 100 preview: Lloyds posts Q3 results

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Lloyds reported a 15% profit slump in the third quarter and announced that it has set aside an additional £1 billion to cover the costs of payment protection insurance (PPI) claims.

Net income of £2.85bn in the three months ended 30 September fell 1% from the same period past year, with underlying profits down 3% to £1.91bn as increased impairments offset lower costs and so fell short of the £2.04bn Bloombergconsensus.

However, the FTSE 100-listed lender, which is still 9% owned by the taxpayers, recorded a 1% year-on-year increase in income to £4.3bn and its capital reserves rose to 13.4% from 13% at the end of the previous quarter.

Earlier this month, the Treasury scrapped its original plans to sell the remaining government stake to retail investors, quoting post-Brexit market volatility as the reason.

Chief Executive Officer Antonio Horta-Osório is searching for ways to prop up Lloyds' dividend and profits against a more testing economic enviornment and the effects of lower-for-longer interest rates caused by the vote to leave the EU. Across the first nine months of the year, net interest income inched up by one per cent to £8.6bn, while statutory pre-tax profit grew by an impressive 52 per cent to £3.3bn from £2.2bn.

The firm's core Tier 1 capital ratio rose to 13.4 percent from 13 percent at the end of June, driven by a gain tied to switching the way it classifies United Kingdom sovereign bonds on its balance sheet.

This was partly the result of the PPI deadline being set for June 2019 earlier this year.

PPI became controversial after it was revealed that many customers had been sold it without understanding that the cost was being added to their loan repayments.

"The outlook for the United Kingdom economy remains uncertain, however the strength of the recovery in recent years means the United Kingdom is well positioned", the bank said in a statement.

Lloyds Banking Group (LYG) said on Wednesday it was on track to meet a cost savings goal and its financial targets for the full year after provisions pushed third-quarter profit below expectations.

Lloyds also said that it has accounted for a further £150m provision to cover other conduct issues, including £100m relating to packaged bank accounts.



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