Buoyant Lloyds says time right to hoist interest rates

L Horta- Osorio says it is the ‘ right thing to do’ against inflationary backdrop

The boss of Lloyds has urged the Bank of England to raise interest rates from historical lows amid rising inflation and weakened consumer confidence due to Brexitun certainty.

The comments from chief executive Antonio Horta- Osorio came as Lloyds, one of the UK’S big four banks, yesterday posted more than doubled pre- tax profits of £ 1.95 billion in the three months to endSeptember as the once statebacked lender hailed a “strong financial performance”.

It compared to £ 811 million profit in Q 3 last year, when Lloyd swash it by extra payment protection insurance ( PPI) provisions.

Hor ta-O so rio said the UK economy remained resilient, but acknowledged some “softening” in consumer confidence after the slump in sterling since last year’s Brexit vote.

He said that consumption was down as a result and that, together with inflation now running at 3 per cent, lifting base rates by a quarter- point to 0.5 per cent was the “right thing to do”.

The Lloyds chief executive’s comments came as many City economists have forecast that the Bank of England will tighten monetary policy in November.

Following the crash of Northern Rock in 2007 and a subsequent wider financial crisis and UK recession, rates went from 5.75 per cent to 0.5 per cent by March 2009, and then down a further 0.25 percent after the 2016 EU referendum.

H or ta-O so rio added that al t hough consumption was down as a result of B rex it uncertainty, exports will be boosted by sterling’s depreciation, and he also pointed to record high employment.

Underlying profit at Lloyds for Q3 nudged up from £ 1.9bn to £ 2bn. The Portuguese boss said that he was“comfortable” with the position of the lender’ s successful motor finance arm, despite the Boe’s expressed concerns about ris- ing levels of consumer debt. He added :“In the first nine months of t he year we have delivered strong financial performance with increased underlying and statutory profit… these results highlight the strength of our customer focused, simple and low risk business model and the benefits of our competitive advantage in the UK.”

Lloyds, which was 43 per cent owned by the state after its taxpayer bail out in the financial crash, was fully returned to private hands in May.

The bank has been dogged by PPI claims, having paid out over £ 18bn to date to affected customers. But it took no additional charges in the quarter. The total contribution of the banking sector to the UK public finances in 2016- 17 was an estimated £ 35.4bn – more than 5 percent of total tax receipts–a report out today shows.

The report, commissioned by UK Finance and based on analysis by business services major PWC, shows that £ 18bn of the sector’s tax contribution came from UK banks, with £ 17bn from foreign banks.