Profits down at Lloyds as financial instability begins to bite

Lloyds Banking Group has seen profits and income fall between July and September as financial uncertainty has made life difficult for Britain's biggest high street lender.

Total income net of insurance was £5,075m in the third quarter, down 5.5% on the April to June period and down 8% on the equivalent period of 2010. The income figure was, however, significantly better than some analysts had been predicting (Credit Suisse had forecast £4,710m for example).

Profit before tax at Lloyds was £644m for the quarter, down from £820m during the previous three months and £885m in the third quarter of 2010. The profit figure will give investors pause for thought, with many analysts looking for a profit coming in at around the £750m mark.

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Today's results come just days after Tim Tookey took over as acting Chief Executive following the announcement that the Portuguese Antnio Horta-Osrio was suffering from exhaustion.

Of particular note, the financial giant states that, "(we) expect to deliver on the financial performance targets incorporated within 2011 guidance (...)," adding that, "as a result of the more challenging economic conditions that have arisen over the last few months we are reassessing our assumptions, principally around GDP growth and the timing of base rate increases. Although further opportunities for improving margins and profitability may partially mitigate these economic impacts if the current weaker economic conditions persist, the attainment of some of our medium-term financial targets, principally with regard to income related metrics, may be delayed to beyond 2014."

BS