The third quarter update from Lloyds suggests it was in a much better position than the market expected – a month ago.
Today, with a second wave in the Covid-19 pandemic a reality rather than a nagging fear, the picture looks a bit different.
“To concentrate on the positives – a property market supercharged by the stamp duty holiday and pent up demand from the first lockdown in spring helped Lloyds rack up big profit in its mortgages arm – with the competitive pressures in this market lessened as lenders become more cautious,” said Russ Mould from AJ Bell.
“Lower than expected impairments also suggest that for now coronavirus isn’t having quite the impact on Lloyds’ credit book as might have been feared.
“However, again, both these tailwinds could soon turn around and be blowing in Lloyds face before long as unemployment mounts, particularly given the impact of increasingly tough restrictions affecting already hard-hit sectors of the economy.
“A big question, with Lloyds sitting on a very healthy capital buffer, is whether it and the rest of its peers will be able to return to the dividend list.
“The decision on dividends is ultimately in the hands of the regulator and despite speculation that banks will get the green light to start doling out cash to shareholders again, this, as with much else, feels difficult to predict with any confidence.”