Lloyds TSB expects 2004 earnings in line with market expectations as its trading performance makes up for setting aside more compensation for past mis-selling of endowment products.
The bank said in a trading statement today that its retail bank had made progress in boosting lending and that all its units' revenues were growing faster than costs.
Consumer lending has slowed, and Lloyds TSB's loan growth has been at the expense of profit margin, although margin decline had slowed from the first half, the bank said.
Bad debts as a percentage of loans will fall for the year, it added. Earnings for this year will be "broadly in line with market expectations", Britain's fifth-biggest bank by assets said.
The consensus of analyst forecasts for full-year pre tax profit is £3.33 billion (€4.8 billion), excluding gains or losses from selling units and changes to economic assumptions and investment values, the bank said.
That is less than the £3.38 billion made a year earlier, although that figure included profits from businesses now sold.
The bank said it would set aside an extra £110 million in 2004 to compensate customers sold endowment mortgages in the past. The products, designed to pay off home loans by investing in financial markets, were popular in the 1980s and 1990s but like other sellers Lloyds has had to pay out to customers who faced shortfalls after stock markets fell.