Lloyds Banking Group is set to be the first major UK lender to report its annual results this Thursday, and analysts predict a strong performance despite ongoing challenges in its motor finance division.
Most forecasts suggest the high street bank will deliver a 7% rise in pre-tax profits for the year, with the City pencilling in £6.38 billion – a significant improvement on the £824 million recorded a year earlier. This turnaround is expected to be driven by a more than doubling of profits in the final quarter of 2025, reaching £1.7 billion.
The positive outlook comes despite Lloyds booking an additional £800 million charge in the third quarter to compensate customers who were unfairly sold car loans. This took the bank’s total motor finance compensation bill to an estimated £1.95 billion so far.
Richard Hunter, head of markets at Interactive Investor, acknowledged that the motor finance provision “played havoc” with many of Lloyds’ key metrics in the third quarter. However, he emphasised that this issue is “not life-threatening” and that the bank’s underlying progress remains strong.
The motor finance mis-selling scandal has hit Lloyds particularly hard, with the bank facing the largest bill among UK lenders. The Financial Conduct Authority is aiming to compensate around 14 million car finance customers who were not properly informed about broker commissions between 2007 and 2024, with an average payout of £700 per agreement.
Despite this ongoing headwind, analysts believe Lloyds is now well-placed to focus on driving the business forward. This includes a heavy emphasis on embedding artificial intelligence across its operations, as well as further expansion into wealth management following the recent acquisition of Schroders Personal Wealth.
Michael Hewson of CMC Market Insights said that with the motor finance provisions “in the rear-view mirror”, Lloyds’ bosses can now “focus on taking the bank forward”.
The earlier-than-usual reporting schedule, which sees Lloyds reporting before its peers and more in line with the US bank reporting season, is part of the bank’s “ambition to move at pace into the year ahead”, as it stated in July.