24th Feb 2022 09:48
(Alliance News) - Lloyds Banking Group PLC on Thursday reported a "solid" 2021, driven by GBP16 billion growth in its mortgage book, and has laid out plans to return GBP2.0 billion to shareholders.
Shares in the blue-chip bank were down 9.4% in London on Thursday morning at 47.27 pence each. The wider FTSE 100 was down 2.5% amid fear of a full-scale war in eastern Europe after Russia announced the beginning of a military operation in Ukraine.
In 2021, Lloyds recorded pretax profit of GBP6.90 billion, sharply higher than GBP1.23 billion in 2020, but behind market consensus of GBP7.21 billion.
The big improvement in results is due to a reversal of credit impairments, as the bank booked a GBP1.34 billion release in 2021 compared to the GBP4.16 billion charge set aside in 2020.
Net interest income dropped 13% to GBP9.37 billion from GBP10.75 billion, and was sharply lower than the GBP11.11 billion hoped for by analyst consensus. Total income surged 28% to GBP37.44 billion from GBP29.17 billion.
Lloyds banking net interest margin improved slightly to 2.54% versus 2.52% in 2020. Lloyds said it benefited from "continued balance sheet growth during the year".
The bank ended the year with loans & advances to customers at GBP448.6 billion, driven by strong net growth in the open mortgage book of GBP16.0 billion - which Lloyds noted was the strongest in over a decade - ending the year at GBP293.3 billion.
Total customer deposits were up to GBP476.3 billion from GBP450.7 billion. The bank noted its Cards balances were down year-on-year, but Lloyds pointed to "signs of recovery" with balances growing GBP500 million in the second half.
"2021 has been a year of solid financial performance with successful strategic execution, ongoing investment and continued franchise growth. This has enabled the group to deliver on its customer focused ambitions, as set out in 'strategic review 2021', as well as on 'helping Britain recover' during the pandemic. It has also enabled the group to offer high levels of capital return to our shareholders," Chief Executive Charlie Nunn said.
The bank plans to implement a share buyback programme of up to GBP2.0 billion, given its strong capital position. Common equity tier 1 ratio - a key measure of a bank's financial strength - increased over the year to 17.3% from 16.2% in 2020.
Lloyds also declared a 2021 total dividend 2.0 pence, up sharply from 0.57p in 2020.
As part of Nunn's new strategy, Lloyds intends to "drive revenue growth and diversification" while "focusing on strengthening cost and capital efficiency" by "maximising the potential of people, technology and data".
The move will see incremental investment of GBP3 billion over the next three years and GBP4 billion over the next five years.
"We will look to deepen relationships with our existing customers, both consumers and businesses of all sizes, and meet more of their financial needs by making our great products more relevant to them and our channels simpler and more personalised to use. This will set the group on a higher growth trajectory with more diversified revenue streams, while we retain our strong focus on cost and capital discipline," Nunn said. He took over as CEO back in August of last year.
Looking ahead to 2022, Lloyds is guiding for a net interest margin above 2.60%, while risk-weighted assets will end the year about GBP210 billion, versus GBP196 billion at the end of 2021.
By Paul McGowan; [email protected]
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