20th Feb 2025 08:59
(Alliance News) - Lloyds Banking Group PLC on Thursday increased its dividend and announced a new share buyback, but quarterly profit slumped after it took a further charge for possible car finance remediation costs.
The UK lender said pretax profit in 2024 fell 20% to GBP5.97 billion from GBP7.50 billion a year prior. Total income fell 3.2% to GBP34.28 billion from GBP35.41 billion, with a 7.7% decline in net interest income to GBP12.28 billion hurting its top line. Lloyds reported a banking net interest margin of 2.95% for 2024, down from 3.11% in 2023. It had expected a banking NIM outcome of "greater than 290 basis points".
Chief Executive Charlie Nunn called it a "robust" performance.
"Pleasingly and as expected, income grew in the second half of the year, supported by a rising banking net interest margin and momentum in other income. We also maintained discipline in costs, whilst asset quality remained strong," he added.
In response, shares in Lloyds Banking Group were 2.9% higher at 64.67 pence each in London on Thursday morning.
In the fourth quarter, pretax profit in 2024 fell 55% to GBP824 million from GBP1.82 billion. Total income rose 0.7% to GBP4.38 billion from GBP4.35 billion, with a modest increase in net interest income to GBP3.27 billion from GBP3.23 billion.
Hurting the bottom line in the quarter, an extra GBP700 million provision for potential remediation costs relating to motor finance commission arrangements in the UK. The extra provision followed a Court of Appeal finding in the so-called Hopcraft case which sided with consumers.
"The provision reflects a probability weighted scenario based methodology incorporating a number of inputs. Clearly significant uncertainty remains around the final financial impact. In this context we welcome the expedited Supreme Court hearing at the beginning of April," Lloyds said.
Broker Barclays said excluding the impairment charge, pretax profit for the quarter is 2% ahead of consensus.
Underlying loans and advances to customers increased by GBP9.4 billion in the year, including GBP2.1 billion in the fourth quarter, to GBP459.1 billion. The increase in the year was led by UK mortgages growth of GBP6.1 billion.
Customer deposits of GBP482.7 billion increased significantly by GBP11.3 billion in the year. It noted growth in Retail deposits of GBP11.3 billion alongside stable Commercial Banking deposits. Customer deposits growth was particularly strong in the fourth quarter, with an increase of GBP7.0 billion.
Lloyds said it continues to see strong asset quality, with an improved credit performance in the year.
Looking ahead, Lloyds expects underlying net interest income of around GBP13.5 billion in 2025, which would be a 5.1% improvement from GBP12.85 billion in 2024.
It expects a 2025 return on tangible equity of around 13.5%, before a rise of "greater than 15%" in 2026. The RoTE in 2024 fell to 12.3%, from 15.8%, but would have sat at 14.0% were it not for motor finance commission arrangements.
In 2025, it expects operating costs of around GBP9.7 billion and an asset quality ratio of around 25 basis points.
For 2026, the bank expects a cost to income ratio of less than 50% and to pay down to a CET1 ratio of around 13.0%.
In 2024, the CET1 ratio fell to 14.2% from 14.6% in 2023. The cost to income ratio jumped to 60.4% in 2024 from 54.7% a year before.
Barclays said the updated guidance points to low-single-digit percentage upside to consensus pretax profit forecasts, excluding remediation in 2025, with the new hedge/strategic revenue guide pointing to much bigger upside in 2026.
Lloyds lifted its final dividend by 15% to 2.11 pence per share final dividend, giving a 3.17p per share total payout, up 15%. It also plans a GBP1.7 billion share buyback, down 15% from GBP2.0 billion a year ago.
Chief Executive Charlie Nunn said: "We are confident of generating more than GBP1.5 billion of additional income from our strategic initiatives by 2026 as we build towards higher, more sustainable returns."
By Jeremy Cutler, Alliance News reporter
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