Lloyds shares drop on muted third quarter results as higher taxes loom

Lloyds Shares Fall After Q3 Results as UK Imposes Higher Bank Taxes

Lloyds Banking Group Q3 Performance and Market Reaction

Q3 Financial Results

LONDON, Oct 29 (Reuters) - Britain's Lloyds Banking Group reported profit before tax for the July-September period of £2.3 billion ($3.1 billion), in line with analysts' forecasts, up from £1 billion a year ago when it took £875 million in remediation charges.

Investor Response and Share Performance

Lloyds shares fell 6% in early trading after the results, on investor disappointment at a lack of upgraded performance targets, in a similar pattern to HSBC's results earlier in the week.

Market Outlook for British Banks

• The share reaction and muted outlook showed signs British banks face tougher times ahead after a run of recent record profits, with Lloyds saying competition in the deposit market in particular is starting to squeeze margins

Comments from Lloyds CFO

• CFO William Chalmers said "we are seeing a tighter and more competitive deposit market," citing competition from non-UK banks, albeit Q3 deposits remained "broadly stable"

Interest Income and Lending

• Q3 net interest income up 10%, despite that margin compression in deposit market, thanks to hedging actions and growth in lending volumes

Remediation Costs and Profit Growth

• Third quarter profit doubles year-on-year as bank avoids remediation costs linked to motor finance scandal that marred Q3, 2025

Government Policy and Taxation

• Results come a day after finance minister John Healey announced higher taxes on the sector in his first budget

Profit Surcharge Increase

• Banks face doubling of profit surcharge from 3% to 6%, but only for 15 months, an overall smaller and shorter-duration hike than many lenders had feared

($1 = 0.7500 pounds)

(Reporting by Lawrence White; Editing by Tommy Reggiori Wilkes)