THE boss of Lloyds Banking Group has declared his confidence that a widely anticipated quarter-point rise in interest rates will not harm the economy. It came as the Bank of Scotland owner reported a statutory pre-tax profit of £1.95 billion for the third quarter – more than double the £811 million it made at the same stage last year but just shy of analysts’ forecasts.

The Bank of England has in recent weeks raised the prospect of lifting interest rates from their historic low of 0.25 per cent to combat surging inflation. Speculation has been mounting that the Bank’s Monetary Policy Committee will vote to increase rates at its next meeting in November, though deputy governor Sir Jon Cunliffe observed this week that the timing of a first hike since 2007 was still an “open question”.

Presenting Lloyds’ third-quarter results yesterday, chief executive Antonio Horta-Osorio said increasing base rates would not present a risk to consumers, despite the central bank’s concerns over rising personal debt levels.

“We see no signs of deterioration, not only in impairments which come later in the cycle, but in non-performing loans, in any of our segments,” he told reporters.

Mr Horta-Osorio said in a separate call with analysts that Lloyds itself was “very positively exposed” to a rise in interest rates”, noting that a slow rise in base rates is “beneficial for retail and commercial banks”.

He had earlier declared his belief that “the UK economy remains resilient.”

“Over the last few months, we have seen the impact of inflation on consumption through pressure on real wages,” Mr Horta-Osorio noted. “However, the economy continues to benefit from record employment levels, as well as private sector deleveraging and rising house prices in recent years.”

But Laith Khalaf, analyst at Hargreaves Lansdown, warned that the bank may sustain “collateral damage” from the Brexit process.

“All the dials are pointing in the right direction at Lloyds, but the share price is still being held back by a consensus of angst over Brexit,” he said. “The bank is heavily plugged into the domestic economy, and so could sustain collateral damage if Brexit negotiations prompt a slump in UK growth.”

Mr Khalaf added that “rising profits at Lloyds will be welcome news for those investors relying on dividends from the bank.”

He said: “The Bank of England could also do Lloyds a favour next Thursday by raising interest rates, which would improve the bank’s profitability further, particularly if followed up with more hikes in 2018.”

Lloyds’ third quarter profits were boosted with the bank having made no further provision for the mis-selling of PPI (payment protection insurance). This was despite claims rising on the back of an advertising campaign for PPI by City watchdog the Financial Conduct Authority (FCA). The lender said claims rose to around 16,000 per week on the back of the advertising, but have since receded to around 11,000 – above the bank’s assumed run rate of 9,000 per week. Its balance sheet provision for PPI was £2.3 billion at the end of September.

Lloyds’ loan impairments, meanwhile, rose to £270 million, up 32 per cent on the third quarter last year, which one analyst said would be a concern for investors.

The bank put the rise in impairments down to a “single large corporate exposure”, alongside the integration of the MBNA credit card business it acquired in 2016.

Lloyds said its credit card book continues to perform strongly, with Mr Horta-Osorio signalling that the MBNA integration was running ahead of schedule. It expects to be complete the integration in the first quarter of 2019.

Meanwhile Lloyds, which made its full return to private hands this year following its bailout during the financial crisis, described the UK housing market as “resilient”, noting that the overall credit performance in its mortgage book “remains stable”.

Mr Horta-Osorio reiterated that the acquisition by Lloyds’ Scottish Widows pension arm of Zurich’s UK workplace pensions and savings business would bring it nearly £20bn of assets under administration and around 500,000 customers.

He told analysts that it will accelerate the development of its financial planning and retirement business.

Shares in Lloyds closed up 0.54p at 67.94p.