Shares in Lloyds (LON:LLOY) slipped despite the bank posting a strong increase in Q3 earnings. As with Barclays (LON:BARC) and HSBC (LON:HSBA), which also dropped on results, it seems investors had let expectations get ahead of themselves.
Strong Q3 earnings
For the three months to September, the UK’s biggest mortgage lender posted a pre-tax profit of £2.33 billion. That was almost double the £1.17 billion it reported in Q3 2025 and well ahead of the £2.28 billion consensus.
However, the beat was mainly down to a sharp drop in ‘remediation’ charges to just £22 million against £875 million last year. In 2025, the bank took a series of large provisions for motor finance claims at its Black Horse business, including £800 million in Q3 alone.
Net interest income of £3.81 billion for the quarter was slightly below the £3.83 billion consensus. As a result, total net income of £5.07 billion was also slightly below the consensus of £5.11 billion.
Key Q3 figures for Lloyds (in £ millions)
| Q3 2026 | Q3 2025 | Change | |
| Net interest income | 3,806 | 3,451 | +10.3% |
| Other income | 1,686 | 1,557 | +8.3% |
| Net income | 5,072 | 4,643 | +9.2% |
| Remediation costs | -22 | -875 | -97% |
| Pre-tax profit | 2,332 | 1,174 | +98.6% |
| Net profit | 1,172 | 778 | +50.6% |
Source: Company data
FY guidance maintained
Despite missing expectations, Lloyds said its underlying business was doing fine. Lending was ‘strong and stable’, with ‘low and stable’ arrears, although it increased its underlying impairment charge as a precaution.
Desposits increased by 1% to just over £500 billion in the first nine months, although retail deposits fell and commercial deposits rose. The bank put the lost retail deposits down to its ‘disciplined pricing’ approach in a competitive market.
For the full year, it maintained its net interest income, cost-to-income, return on equity and capital generation targets. CEO Charlie Nunn promised to deliver ‘continued, sustainable value for our customers and shareholders’.
Once again, it appears market expectations were too high going into today’s update. This is becoming a theme in Q3, with quite a few companies seeing their shares fall despite what look like decent results.
The UK banks have had a good run since the start of 2024, and at their July peak Lloyds’ shares had almost trebled. Given the FY26 consensus is for EPS of 10p against FY23 EPS of 7.5p, earnings have only gone up by a third in the meantime.
In other words the shares have massively re-rated, so any disappointment is likely to be punished. On the plus side, the dividend yield is around 4.7% and the bank continues to buy back shares so there is some support.
