Lloyds today reported that its profits dropped by 26% in the three months to September, thanks to the UK’s “deteriorating” economic outlook.
The banking group was also forced to put aside nearly £670m to protect against potential defaults on loans and mortgages.
AJ Bell’s Laith Khalaf said: “For years the banks like Lloyds would have been dreaming of a time when they could see a meaningful rise in interest rates, allowing them to make more money out of the traditional activity of farming customer deposits and lending out that cash to achieve a decent return.
“However, rate rises at a time of acute pressures on households and businesses are very much a double-edged sword and Lloyds is just the latest to reflect that in rising impairments and provisions for bad debts.
“It says something less than positive about the UK economy that Lloyds is putting aside more than double what analysts had anticipated to protect against this risk.
“What will really upset the apple cart with shareholders is if Lloyds shows any sign of deviating from an upward path on dividends, which is a key reason many people hold the stock.”