The taxpayer-backed bank recorded a loss of £361m in the three months to September, a solid improvement on the £501m loss in the same period of last year.
Underlying profits doubled to £840m in the quarter, with impairment falling 40 per cent to £1.35bn, a 1.1m increase in online customers and another £148m saving from the so-called Simplifications initiative.
And the bank also expects to benefit from the Funding for Lending scheme (FLS), a government and Bank of England programme to help banks borrow cheaply.
Lloyds has already taken £1bn from the FLS, and expects to make a bigger drawdown in the next two months. Chief executive Antonio Horta-Osorio said that should start feeding through to increased loan volumes and lower prices in the new year.
However, the bank still does not know where its PPI provisions will end. Lloyds thought it was over the worst of the scandal, but still paid out £250m per month to customers, barely down on the £300m per month in the previous quarter and far higher than earlier expectations.
The extra £1bn provision takes total provisions so far to £5.285bn. The bank also set aside £150m against German insurance mis-selling claims.
“On the downside, the full and final cost of PPI remains unknown,” commented Richard Hunter, head of equities at Hargreaves Lansdown.
“Lloyds is exposed to the stuttering economies of the UK and Ireland, whilst there is pressure on margins. The stock still holds no attraction to the income seeking investor in the absence of a dividend, whilst despite its progress the government breakeven price remains a distant dream.”