Lloyds Banking Group boosts profits 24 per cent and reveals £1.75bn share buyback scheme
Lloyds Banking Group’s profits surged 24 per cent in 2018, it revealed today, as it announced a £1.75bn share buyback scheme.
The bank said it was "confident in the future" of the UK economy, citing record employment, surging wages and low interest rates.
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The figures
Profit after tax leapt 24 per cent to £4.4bn year on year, though that was below analyst expectations of £4.6bn.
Net income grew a marginal two per cent to £17.8bn while the net interest margin stood just shy of three per cent.
Operating costs fell even as the bank set aside £200m to address PPI mis-selling claims in the fourth quarter.
The bank upped its dividend five per cent on 2017 to 3.21p per share, as it announced a £1.75bn share buyback that will see investors’ total payout for the year hit £4.4bn.
Why it’s interesting
FTSE bellwether Lloyds welcomed the UK’s robust economy for the strength of its 2018 balance sheet, pointing to record employment and continued GDP growth.
Lloyds said it was working on the assumption that the UK would leave the EU in a smooth transition.
Chief financial officer George Culmer said it was not being "complacent" by giving away capital amid economic uncertainty but that it had the strength to do so.
He added that Brexit planning costs, including new subsidiaries and moving staff, were "not material at all."
Tom Stevenson, investment director from Fidelity Personal Investing’s share dealing service, said shareholders will welcome the higher dividend as they keep one eye on any potential fallout from the Brexit negotiations.
“Lloyds is more dependent on the health of the UK economy than most companies in the FTSE 100,” he said.
“This explains the market’s caution about the shares, which have lost a third of their value over the past four years. Although the immediate outlook is clouded by Brexit uncertainty, Lloyds has a low-risk and simple business model. As long as the UK economy does not fall off a cliff, nor should Lloyds.”
The banking group added that PPI costs rose by £750m over 2018, with £200m of claims appearing in the fourth quarter alone, seeing its total mis-selling costs hit £19.4bn.
The charges were fuelled by 13,000 complaints a week as the August 2019 deadline for PPI claims approaches.
What Lloyds Banking Group said
Chief executive Antonio Horta-Osorio hailed 2018 as a year of “strong strategic and financial delivery”.
He added: “We have also delivered another year of increased statutory profits and returns along with strong capital build and, as a result, have been able to recommend an increased dividend and share buyback to our investors.
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“Over 2018 the UK economy has proven itself to be resilient with record employment and continued GDP growth. Although the near term outlook for the UK economy remains uncertain, our strategy continues to deliver for our customers.
“I remain confident that with our unique business model and market leading efficiency we can continue to increase investment in customer propositions and grow our leading digital bank, whilst at the same time delivering strong financial performance and market leading returns.”