Lloyds Bank pre-tax profits more than doubled in 2016 as PPI charges were slashed
Lloyds Banking Group reported today that its statutory pre-tax profits for the year had shot up, as conduct-related charges for the year (ie. PPI costs) were more than halved.
The figures
The bank revealed statutory profits before tax of £4.2bn, up 158 per cent on £1.6bn the year before – although analysts had predicted the figure to be closer to £4.4bn.
Lloyds also revealed £2.1bn of conduct charges for the year, including additional charges to its payment protection insurance (PPI) provision, which were announced last quarter.
However, this is less than half the £4.8bn the bank racked up in 2015, including £4bn in PPI costs.
But underlying profits were slightly down at £7.9bn, down three per cent compared with £8.1bn the year before, while total income slipped to £17.5bn, down one per cent from £17.6bn.
The lender also revealed its common equity tier 1 capital stood at 13.8 per cent after dividends at the end of 2016, compared with 13 per cent at the end of 2015.
Lloyds increased its total ordinary dividend for the year to 2.55p, up 13 per cent from 2.25p in 2015. The board also proposed a special dividend of 0.5p per share.
The lender's shares rose 3.3 per cent at the open.
Why it's interesting
Like many banks, Lloyds has been weighed down by litigation, legal and conduct costs. The bank surprised some last quarter when it revealed it was adding £1bn to its provision for PPI.
As a UK-focused lender, some had wondered how Lloyds would cope in the aftermath of Brexit. In contrast to all of its peers, its share price was lower than it was on 23 June before the market opened this morning.
The bank is also the only major UK retail lender to have no base in any of the other 27 EU member states. That said, it was reported earlier this month Lloyds is now considering turning its branch in Berlin into a subsidiary to make sure it keeps one legal foot in the EU following Brexit.
It is thought that, if this setup goes ahead as planned, the bank will not have to move any staff out of the UK.
Lloyds, which had to be bailed out in the aftermath of the financial crisis, is also well on the way to shrugging off government ownership, with the current pace of travel suggesting the state will ditch its final stake in the first half of this year.
What Lloyds Banking Group said
Chief executive Antonio Horta-Osorio said
We have delivered strong financial performance in 2016 as we continue to make good progress against our strategic priorities.
Strong capital generation has enabled us to increase our ordinary dividend by 13 per cent, pay a special dividend and fully cover the expected capital impact of the MBNA acquisition.
As a simple, low risk, UK focused bank we are committed and well positioned to help Britain prosper and become the best bank for customers and shareholders.