Banks face an internal struggle between the boon of rising interest rates, which push up margins, and the risk of a sharper increase in bad debts, which would erode profits. For Lloyds Banking Group, Britain’s biggest mortgage lender, the conflict is likely to prevent the shares moving higher.
Third-quarter pre-tax profits missed market expectations after Lloyds took a higher than expected £668 million in impairment charges to account for a darkening economic outlook. That was despite a jump in the net interest margin to 2.98 per cent, from 2.55 per cent the same time last year, as the lag in higher interest rates being passed onto customers inflated margins.
Full-year guidance has been raised to a margin of more than 2.9 per cent, compared with
