(Bloomberg) -- Lloyds Banking Group Plc beat earnings expectations in the third quarter as the British bank’s borrowers coped better than expected with repayments.

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Pretax profit fell 2% to ￡1.82 billion ($2.4 billion), above a Bloomberg-compiled estimate of about ￡1.65 billion.

The bank took ￡172 million in impairment charges for customers it fears could default, less than analysts had estimated, and the bank noted “resilient credit performance” during the three months through September.

Chief Financial Officer William Chalmers told reporters the impairment rate was flattered in the quarter by a debt sale, though the underlying rate of around 25 basis points was “still pretty benign.”

The bank’s loan book grew 1% in the quarter and now amounts to ￡457 billion. Chalmers said the mortgage market remained competitive, with applications jumping 17% this year, helping to offset a quieter time in commercial lending as many businesses work to repay Covid-era debts.

As the UK property market heads into the traditional autumn rush, Lloyds also lifted its outlook for house prices and now expects a 3.1% increase this year and 2% next year, helped by more attractive mortgage offers even as prices near record highs.

Lloyds’ net interest margin was 2.95% in the third quarter, down from 3.1% a year ago. Like many lenders, it has structural hedges in place to reduce its sensitivity to interest rates, meaning its margins don’t feel the full impact of recent Bank of England rate cuts. Still, intensifying mortgage competition curbs how much it can make on new loans.

Looking ahead to next week’s Budget, Chalmers said “that clarity, that certainty, that stability has to be point one” from the new Labour government. “Beyond that, we look for policies that stimulate investment.”

Lloyds, the biggest provider of car finance, made no extra provisions for an ongoing Financial Conduct Authority probe into whether borrowers were overcharged, having already set aside ￡450 million to pay for possible compensation and other costs. The watchdog is due to announce its next steps in May 2025.

Shares in Lloyds rose as much as 2% in early trading on Wednesday, and were 1.7% higher as of 8:39 a.m. in London.

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