LONDON, Oct 23, 2025 (BSS/AFP) - British lender Lloyds Banking Group on Thursday announced sliding net profits as it set aside a further œ800 million ($1.1 billion) to compensate consumers caught up in a UK car loans scandal.

Profit after tax dropped 14 percent to œ2.9 billion in the first nine months of the year compared with a year earlier, the bank said in a statement.

Britain's financial regulator earlier this month proposed that lenders pay consumers œ8.2 billion in compensation after some car loans were deemed unlawful.

The Financial Conduct Authority also said the payouts on around 14 million unfair motor finance agreements could begin next year, under an industry-wide compensation scheme.

Lloyds said the additional provision brought its total expected compensation to œ1.95 billion.

The new charge helped push down profit after tax by 42 percent in the third quarter.

Stripping out the car finance charges, "strong capital generation was supported by income growth, cost discipline and strong asset quality in the first nine months of 2025", chief executive Charlie Nunn said.

"Our strategic progress combined with this financial performance gives us confidence in our performance for the year and our 2026 guidance," he added.

Lloyds shares were flat in early London trading following the update.

Regarding the motor finance scandal, the UK Supreme Court mostly overturned judgements made by the Court of Appeal last year that ruled it was unlawful for car dealers to receive a commission on loans without sufficiently informing borrowers.

In some cases, these loans -- available for several years from 2007 -- allowed car dealers to propose higher interest rates in return for a bigger commission from banks.

Barclays bank said Wednesday that it had set aside œ325 million in compensation payments.