Lloyds Banking Group has seen its operating profits drop by 2% year-on-year to £2.29bn in the three months to 30 September, despite publishing a performance that was in line with expectations.

The firm said that its profit after tax dropped by 2% in the same period to £1.82bn, while its net interest income also fell by 6% to £3.23bn year-on-year.

However, the profit before tax figure beat the estimate of £1.62bn from earlier in the year.

Despite the drop in year-on-year figures, Lloyds said it recorded a "robust financial performance" quarter-on-quarter in Q3.

Group chief executive at Lloyds Banking Group, Charlie Nunn, said: "The group delivered a robust financial performance in the third quarter of 2024, with growth in income alongside continued cost discipline and strong asset quality. Our performance allows us confidently to reaffirm our 2024 guidance."

Following the announcement, the FT reported that shares at Lloyds increased by 2% in early trading.

Looking ahead, the firm said that its customers had demonstrated "improved confidence", with non-essential spending rising since the start of the year, and with speculation of the Bank of England base rate dropping further later in the year, this improvement is expected to continue.

Nunn added: “As mentioned during our half year 2024 results update, we are making good progress on our strategy and remain on track to deliver higher, more sustainable returns. As ever, we are guided by our purpose of helping Britain prosper and continuing to provide support to our customers. The strength of the group's franchise, alongside our financial performance, enables us to deliver for all stakeholders."

Investment director at AJ Bell, Russ Mould, added that although there has been concern about the impact on consumer confidence ahead of the Autumn Budget, the banking firm "paints a picture of improvement".

He concluded: "The beat was driven by lower-than-expected impairments. The amount of bad debt being chalked up is still low and the bank and its customers will hope we’re now through the worst of the cost-of-living crisis.

"The other big positive surprise for investors was the quarter-on-quarter increase in the net interest margin – measuring the difference between what the bank pays out to depositors and charges those to whom it is lending money.

"Guidance for the year as a whole remains unchanged which might explain why the initial reaction to the update was muted, if still positive. In addition, Lloyds, like its peers, has enjoyed a strong 2024 in share price terms so the market may feel it has given the company enough credit for its progress for now."

---