20th Feb 2019 12:48
LONDON (Alliance News) - Lloyds Banking Group PLC on Wednesday hiked its dividend payment and upped its buyback programme as it posted increased annual profit on lower remediation and payment protection insurance costs.
Shares in the FTSE 100-listed high street lender were up 4.0% in midday trading at 60.70 pence each.
Lloyds declared a total dividend of 3.21 pence, up 5% on 2017. It also said it will embark on a GBP1.75 billion share buyback, up from GBP1 billion share buyback announced in 2017.
The GBP4 billion total capital return for 2018 is a 25% increase on the GBP3.2 billion returned in 2017.
The bank's 2018 pretax profit increased 13% to GBP5.96 billion from GBP5.28 billion the year before. Analyst consensus saw Lloyds achieving pretax profit of GBP6.4 billion.
For the fourth quarter, Lloyds profit decreased to GBP1.03 billion from GBP1.82 billion in the third quarter. It, however, was higher than GBP780 million recorded in the fourth quarter of 2017.
The lender's remediation charges fell to GBP600 million from GBP865 million, and Lloyds expects remediation costs to fall "significantly" in 2019.
The bank's operating costs in 2018 were largely flat at GBP8.17 billion with an 18% increase in impairment costs to GBP937 million.
Lloyds operating costs were forecast by consensus at GBP8.2 billion, with the lender expected to book a GBP700 million charge to meet PPI claims.
Lloyds ended up taking a GBP750 million PPI charge in 2018, sharply lower than GBP1.65 billion booked in 2017.
Lloyds recorded restructuring costs of GBP879 million, a 42% increase from the GBP621 million paid in 2017, with GBP267 million incurred in the fourth quarter. The bank expects restructuring costs to reduce significantly in 2019.
The FTSE 100-listed bank's annual net income increased 1.7% to GBP17.77 billion from GBP17.47 billion in 2017, in line with consensus. Analyst consensus had the high-street lender hitting GBP17.8 billion net income.
Net interest income increased 3.2% to GBP12.71 billion from GBP12.32 billion. Lloyds attributed the rise in net interest income on an improved net interest margin and slightly higher average interest-earning banking assets.
"2018 has been a year of strong strategic and financial delivery, as we build on our unique capabilities to transform the group to succeed in a digital world," said Chief Executive Antonio Horta-Osorio
"We have made significant progress against the priorities we set out at the start of the year when we launched the third stage of our strategic plan, which is supported by investment of more than GBP3 billion over the plan period. 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," said Horta-Osorio.
Lloyds banking net interest margin in 2018 was 2.93%, up from 2.86% in 2017, in line with consensus of 2.93%. The Retail banking division saw its NIM increase to 2.68% from 2.60%.
Lloyds risk-weighted assets decreased 2.4% in 2018 to GBP206 billion. The bank's pro-forma common equity tier one ratio ended 2018 flat at 13.9%.
The lender's Retail division posted a 13% increase in underlying profit to GBP4.27 billion from GBP3.77 billion in 2017. The unit's net interest income increased 4.1% to GBP9.07 billion.
The bank's loans & advances to customers at December 31 stood at GBP444 billion, flat on the number achieved twelve months prior.
Lloyds' open mortgage book at the end of 2018 decreased slightly to GBP266.6 billion.
Lloyds, whihch owns the largest share of the UK mortgage market, said the overall credit performance in its UK mortgage book remained strong.
Lloyds customer deposits in 2018 were flat at GBP416 billion.
The company's Commercial banking unit saw annual underlying profit decrease by 3.1% to GBP2.16 billion on a slight decrease in net interest income to GBP3.00 billion.
Commercial banking's SME lending increased 2.6% to GBP31.8 billion with Global Corporates & Financial Institutions lending up 5.5% to GBP34.4 billion. Mid Markets lending increased 7.8% to GBP31.7 billion.
Lloyds said it was targeting growth in SME, Mid Markets and consumer lending. The growth in these areas was offset by the sale of Lloyds GBP4 billion Irish mortgage portfolio.
The lender's group return on tangible equity in the period was 11.7%, up from the 8.9% achieved in 2017.
For 2019, Lloyds is guiding a further increase in its return on tangible equity, hoping to achieve between 14% to 15%. Lloyds is also guiding for its net interest margin to end 2019 at about 2.90%, broadly flat on its current figure.
Lloyds also said it is targeting on becoming a "top three" financial planning business in the UK on the back of its partnership with FTSE 100-listed wealth manager Schroders PLC.
Horta-Osorio added: "Over 2018 the UK economy has proven itself to be resilient with record employment and continued GDP growth. Whilst the near term outlook for the UK economy remains unclear, we continue to believe that our simple, low risk business model will deliver strong financial performance and market leading returns with a resilient net interest margin, lower operating costs enabling increased investment, strong asset quality and lower remediation costs."
Related Shares:
Lloyds