Lloyds profits plunge 40% on car finance scandal

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Lloyds Banking Group’s profits tumbled almost 40 per cent to £1.2bn in the third quarter, as the bank took an £800mn charge linked to the car finance mis-selling scandal.

The UK high-street lender had already disclosed that it would take the £800mn hit this quarter from the long-running car finance probe, meaning that pre-tax profits were better than the £1bn that analysts had expected.

But pre-tax profits were 36 per cent lower than the £1.8bn the bank generated in the same period last year, and the £2bn it reported in the previous quarter.

Lloyds disclosed the extra charge to cover redress payments for the motor finance scandal earlier this month, after the Financial Conduct Authority set out details of its compensation scheme. Lloyds has now made total provisions of £1.95bn for the scandal.

The car finance hit offset an increase in third-quarter net income to £4.6bn, up from £4.3bn over the same period last year. In the three months to June, the bank brought in £4.5bn.

The bank is in the final phase of a plan launched in 2022 by chief executive Charlie Nunn to generate more income that is less closely tied to the interest rate cycle.

This month the Financial Times reported that Lloyds was assuming full control of Schroders Personal Wealth, its joint venture with the asset manager, as it targets the mass affluent market.

Nunn said the group had continued to perform well and was making progress on its strategy.

“Strong capital generation was supported by income growth, cost discipline and strong asset quality in the first nine months of 2025, despite the impact of the additional motor finance charge in the third quarter.”