Lloyds Banking Group PLC Reports Underlying Q3 Profits Up 9%

The shares of Lloyds Banking (LSE: LLOY) (NYSE: LYG.US) dropped 2p to 77.5p during early trade this morning today after the bank said its third-quarter underlying core profits had improved by 9%.

The FTSE 100 member said underlying core profits had advanced from £1,701m to £1,853m during July, August and September. Underlying profits including non-core activities improved 83% to £1,524m.

The bank’s statutory figures showed a third-quarter loss of £1,298m following an extra £750m set aside for PPI claims, restructuring charges totalling £408m and £709m relating to ‘asset sales and volatile items’.

Total net asset value per share was 51.1p at the end of September.

António Horta-Osório, the Chief Executive of Lloyds, said:

Our strategic plan continues to deliver and customers are increasingly seeing the benefits.  At the same time we are creating a low cost, low risk differentiated business, resulting in better profitability and returns despite further legacy charges.

Sr Horta-Osório also lifted his guidance for 2013 as a whole, saying that the bank’s net interest margin would be a higher-than-expected 2.11% and that non-core assets would be a lower-than-forecast £66bn by the end of the year.

He also confirmed Lloyds had commenced discussions “with the regulators regarding the timetable and conditions for future dividend payments“.

Prior to today, City experts were predicting Lloyds would produce earnings at 6.5p per share during 2014 that could perhaps fund a 2p per share dividend.

Following this morning’s price reaction, those projections support a potential 2014 P/E of 12 and a possible yield of 2.6%.

Of course, whether those ratings, today's quarterly figures as well as the broader prospects for the banking sector all combine to make Lloyds a 'buy' right now is something only you can decide.

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> Maynard does not own any share mentioned in this article.