Lloyds Q3 profits plunge 36% on car finance scandal costs
By Frank Prenesti
Date: Thursday 23 Oct 2025
(Sharecast News) - Lloyds Bank on Thursday reported a 36% fall in third quarter profit after taking an extra £800m hit from the motor finance scandal.
Pre-tax profit for the three months to September 30 came in at £1.17bn, beating consensus estimates of £1.04bn. Lloyds said its "best estimate" of potential payout over the mis-selling of financing would be almost £2bn.
Underlying net interest income rose 7% to £3.4bn, with the net interest margin - the difference between savings and loan rates - up 11 basis points year on year to 3.06% for the quarter.
Lloyds lifted guidance for full-year net interest income slightly to £13.6bn from £13.5bn.
Return on tangible equity, a key metric, was forecast at 12% due to the impact of motor finance redress or 14% without the provision and against previous guidance of 13.5%.
Lloyds is the Britain's largest car lender via its Black Horse division and is widely expected to pay the largest bill among its peers caught up in the scandal.
The Financial Conduct Authority's planned compensation scheme could cost lenders a combined £11bn as a result of 14m historic car loan contracts that may be deemed unfair because of commission arrangements with car dealers.
AJ Bell investment director Russ Mould said: "The car finance scandal may have sent profit into reverse but there was enough underlying good news from Lloyds to keep the share price ticking over."
"Year-to-date the stock is up more than 50% despite taking extra provisions to cover this issue. Given the company had already disclosed an extra £800m hit linked to mis-selling, there was nothing new to shock investors. In fact, pre-tax profit was better than feared."
"In the background, the business is making progress with the plan instituted by CEO Charlie Nunn in 2022 to generate a greater proportion of income which is not closely linked to interest rates. The goal is to make earnings more reliable and less cyclical."
Reporting by Frank Prenesti for Sharecast.com
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