Lloyds Profit Plunges 36% Amid £1.95B Car Loan Compensation
Lloyds Banking Group has reported a significant decline in pre-tax profits, down 36% to £1.2 billion in the third quarter, largely due to an additional £800 million charge for compensating customers unfairly sold car loans by US banks. Despite this setback, the bank has shown lending growth across multiple sectors and exceeded analyst expectations.
The total estimated compensation bill for motor finance issues at Lloyds has reached £1.95 billion. This follows the Financial Conduct Authority's (FCA) proposal for a redress scheme affecting around 14 million unfair car finance deals, with each payout averaging about £700. Lloyds, led by Group Chief Executive Charlie Nunn, is seeking a dialogue with the FCA over the scheme and has not ruled out a legal challenge. The bank's finance chief, William Chalmers, has expressed concerns about the scheme's proportionality and potential consumer harm.
On a positive note, Lloyds reported lending growth of 4% across various sectors in 2025. Current account and savings account balances have also grown this year, driven by wage growth and adjusted spending habits. Chief Executive Charlie Nunn highlighted the group's resilience, benefiting from income growth and cost savings despite the motor finance charge.
Lloyds' pre-tax profit decline is primarily attributed to the compensation charge for unfair car loans. Despite this, the bank has shown lending growth and resilience. The FCA's proposed compensation scheme remains a contentious issue, with Lloyds seeking dialogue and not ruling out a legal challenge.
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