The group’s statutory pre-tax profit for the first six months to the end of June hit £3.9 billion, up nearly a quarter from £3.1bn the same time last year. This growth was driven by an increase in the lender’s income and a higher net interest margin (Nim) – which measures the difference between earnings from loans and payouts for deposits.

However, the group’s second-quarter profit dipped to £1.6bn, down 29% from the first quarter’s £2.3bn, although this was in line with the same period in 2022. Provisions for bad loans more than doubled year on year to £419 million, reflecting the rising number of mortgage holders have fallen into arrears as interest rates have risen.

The bank has adjusted its outlook for the base rate, predicting it will peak at 5.5% rather than the previously estimated 4%. Despite these challenges, Lloyds increased its interim dividend by 15% to 0.92p per share for the first half of the year. The group also raised its 2023 Nim guidance to more than 3.1%, up from the previous 3.05% estimate.

Group CEO Charlie Nunn said: “We know that rising interest rates, cost of living pressures and an uncertain economic outlook are proving challenging for many people and businesses. Guided by our purpose of Helping Britain Prosper, we remain fully focused on proactively supporting our customers and helping them navigate the current environment.

“The group delivered a robust financial performance in the first half of 2023 with strong net income and capital generation alongside resilient asset quality.

“We continue to make good progress on delivering our strategic initiatives. Combined with our franchise resilience, this better positions us to support our customers, both today and in the future.”