Lloyds posted profit before tax of £1bn in the third quarter (£700m profit after tax) and now expects money set aside for bad loans this year to be at the lower end of forecasts.

The impairment charge in the third quarter was booked at £0.3bn, in line with pre-crisis levels, with the group taking an overall £4.1bn hit for the nine months to the end of September reflecting the impact of coronavirus earlier in the year.

In total, it granted 1.2 million payment holidays and c.£11bn of lending through government schemes, with an 18% market share of support scheme lending, including a 21% share of Bounce Back Loans.

Of the payment holidays, around 477,000 related to mortgages. But as of 24 October 2020, most have matured with 83% of these, or 384,000, having resumed repayments, while 13% extended and 4% missed payment.

Mortgage activity picked up strongly over the three months to the end of September, accounting for 22% of all mortgage approvals the lender said, adding it had a strong pipeline going into the fourth quarter.

However, income has been hit by lower interest rates, and lower levels of customer activity, Lloyds said.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Lloyds wins a rosette for a surge in applications for home loans and a huge increase in mortgage lending, led by the mini boom in the housing market.

“It doesn’t end here, as Lloyds has also nabbed a large share of approvals for the next quarter as well. This is encouraging news, but once the stamp duty holiday ends and given the fragile economic recovery, there are concerns the mini housing boom could turn into a bust, which would lead to a reversal of fortunes for this part of Lloyds business.”

António Horta-Osório, group chief executive of Lloyds Banking Group, said: “The impact of the coronavirus pandemic on the global economy and on people and businesses within the UK has been unprecedented.

“We remain focused on working together with the government and our regulators to ensure that we continue to support our customers in this challenging time.

“Although our performance has clearly been impacted by the pandemic and the associated challenging economic environment, I am pleased that we are now seeing an encouraging business recovery and, with impairments significantly lower, a return to profitability in the third quarter.”

Race Action plan

The bank also announced it has put in place a ‘Race Action plan’ to drive cultural change within the company, as well as aiming to reduce the carbon emissions financed by the lender to over 50% by 2030.

Horta-Osório said: “Societal expectations of companies, particularly regarding sustainability, continue to increase and we are taking action to build an inclusive and more sustainable future.

“We have announced a Race Action plan to drive cultural change, including a clear target to increase black representation in senior roles.”