By Scott Wright

LLOYDS Banking Group has lifted its full-year profit guidance amid the improving economic outlook after doubling third-quarter profits to £2 billion.

The Bank of Scotland owner, presenting its first results under new chief executive Charlie Nunn, highlighted benign credit conditions and strong growth in mortgages as earnings for the period exceeded analysts’ expectations.

Lloyds has reflected the brightening outlook throughout the year by steadily releasing hundreds of millions of pounds of provisions for bad debts arising from the pandemic as the economy has reopened and rebounded from the crisis. It booked a net credit of £84 million relating to loan impairments for the third quarter, after booking a charge of £301m at the same stage last year.

For the first nine months of the year, it reported a net credit of £740m linked to loan impairments, in contrast to a charge of £4.1bn for the same period in 2020.

The bank now expects a net credit for the year for loan impairments.

In recognition of the improving macroeconomic conditions, Lloyds said it now expects its return on tangible equity, a key measure of profitability, to be more than 10%. This compares with its forecast issued in February, when it guided on a return on tangible equity of between 5% and 7%.

The bank reported a statutory profit before tax (after impairments) of £5.9bn for the nine months to September 30, compared with £434m at the same stage last year. Net income for the nine months was booked at £11.6bn, up from £10.8bn.

Russ Mould, investment director at AJ Bell, said: “Lloyds beat forecasts with its latest quarterly results, helped by the release of more cash that had been set aside for pandemic-related bad debts as well as a strong performance with mortgage lending.

“Investors have been warming to banks in recent months in hope that rising inflation will prompt higher interest rates, which in turn provides more opportunities for lenders to increase earnings.”

Mr Nunn replaced Antonio Horta-Osorio at the helm of Lloyds in August, when he arrived from HSBC.

Last week, the bank announced the closure of a further 48 branches south of the Border. These will add to the 100 already shut or earmarked for closure this year.

Shares closed up 1%, or 0.5p, at 49.46p.