Lloyds Banking Group Plc set aside less than expected for troubled loans in the third quarter, helping it to beat earnings expectations for the period and maintain its outlook for the year.

Pretax profit jumped to £1.86 billion ($2.3 billion), above a Bloomberg-compiled estimate of about £1.76 billion, while its net interest margin was 3.08%, a slight fall from earlier in the year “given the expected mortgage and deposit pricing headwinds,” the bank said Wednesday.

Britain’s biggest mortgage lender took a lower-than-expected £187 million provision for customers it fears could default, and said households were coping well with higher interest rates. Its asset quality ratio, a measure of bad debt, has improved and is now expected to be less than 0.3% this year, Lloyds said.

“Robust financial performance and strong capital generation in the first nine months of the year was driven by net income growth, cost discipline and resilient asset quality,” said Charlie Nunn, chief executive officer.

Overall deposits fell 1% year-on-year to £470 billion.

The Bank of England has raised rates from almost zero to 5.25% over the past two years in a bid to constrain inflation that’s still at the highest level in more than three decades. This has heaped pressure on the mortgage market, with banks passing on higher funding costs to borrowers who are rolling off fixed deals.

Still, Lloyds’ typical mortgage customer has an annual income of £75,000, which is far above the UK average and offers a cushion against the cost-of-living crisis, Nunn said in July.

The hike in rates also means lenders are earning more on the money they hold with the central bank, leading to calls from politicians and regulators to pass more of this windfall to their customers.

Lloyds’ results come a day after rival Barclays Plc cut its outlook for margins in the UK this year, saying competition for deposits was heating up.