This is notable considering broader concerns about lenders’ diminishing benefits from rising interest rates. The bank’s Q3 profits of the previous year were adjusted from £1.5bn, recognising an exceptional one-time charge of nearly £1.1bn due to accounting changes for insurance businesses.

Despite Barclays’ recent UK margin guidance revision which stirred the banking sector, Lloyds reaffirmed its outlook. It projected a net interest margin, which measures profitability based on the spread between loan charges and deposit costs, of over 3.1% for the entire year. However, Lloyds reported a slight decrease in this margin during the third quarter, going from 3.14% in June to 3.08% in September.

Political pressure and recommendations from the Financial Conduct Authority (FCA) have prompted high street banks, including Lloyds, to increase interest rates for savers. This is in response to concerns that banks had been more prompt in implementing Bank of England base rate hikes for borrowers than for depositors.

Charlie Nunn, chief executive of Lloyds Group, said: “The group continues to perform well. Robust financial performance and strong capital generation in the first nine months of the year was driven by net income growth, cost discipline and resilient asset quality. This performance allows us to reaffirm our 2023 guidance.”

While higher interest rates generally bolster banks’ profitability, they also pose increased default risks for borrowers. Lloyds provisioned £187m for potential bad loans this quarter, a sum considerably lower than analysts’ £336m expectation and the £668m set aside a year prior.

Over a nine-month span, the bank’s pre-tax profit rose to £5.7bn from £3.7bn, with a near-stable revenue of £4.5bn, influenced by heightened interest rates but tempered by competitive margins and waning lending demand.