Lloyds Banking Group reported its pre-tax profits fell to £644 million in the three months to September — a 21% drop from the previous quarter.   

In the first nine months of the year, group income was down 15% from the same period last year, driven in part by subdued lending demand, customer deleveraging, and higher wholesale funding costs, according to Lloyds. Outstanding consumer loan balances dropped by 5% in September from a year earlier.

"The fragile U.K. economy and higher bank funding costs are likely to keep downward pressure on new lending, a negative for structured finance issuance," according to Standard & Poor's analysts.

Lloyds accounts for about a quarter of U.K. mortgage balances outstanding, and 35% of U.K. RMBS that S&P rates.

Moody's Investors Service said it has placed on review for possible downgrade the 'C-' bank financial strength rating and 'A1' senior unsecured debt and deposit rating of Lloyds TSB Bank, the 'A2' senior debt rating of Lloyds Banking Group, certain junior securities and related group entities.  
The rating agency said its review was prompted by the significant upheaval within Lloyds' senior management, following the announcement that current CEO António Horta-Osório has had to take a temporary leave of absence.

The situation, according to agency, is made worse by the fact that it comes at a time of turbulent conditions in the financial markets and the necessity for Lloyds to execute important tasks, including the European Union-mandated sale of branches and the ongoing wind-down of non-core assets.

The review will focus on Lloyds' board's ability to quickly regain stability within the senior management team and the efficacy of any new senior leadership arrangements.


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