20th Feb 2019 07:38
LONDON (Alliance News) - Lloyds Banking Group PLC on Wednesday posted a strong rise in annual profit but missed consensus, as the FTSE 100-listed lender increased its dividend and share buyback programme.
In 2018, Lloyds's pretax profit increased 13% to GBP5.96 billion from GBP5.28 billion the year before.
The reported pretax profit fell short of market expectations by 6.9%. Analyst consensus saw Lloyds achieving pretax profit of GBP6.4 billion.
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 payment protection insurance claims. Lloyds ending up taking a GBP750 million PPI charge in 2018.
Lloyds posted restructuring costs of GBP879 million, a 42% increase from the GBP621 million paid in the same period a year before.
The FTSE 100-listed bank's net income increased 1.7% to GBP17.77 billion from GBP17.47 billion in 2017, in line with consensus. Net interest income increased 3.2% to GBP12.71 billion from GBP12.32 billion.
Analyst consensus had the high-street lender hitting GBP17.8 billion net income.
"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 declared a total dividend of 3.21 pence, up 5% on 2017. Lloyds also announced its intention to embark on a GBP1.75 billion share buyback, up on the 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.
Lloyds banking net interest margin in 2018 was 2.93%, up from 2.86% in 2017, in line with consensus of 2.93%.
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 return on tangible equity in the period was 11.7%, up from the 8.9% achieved in 2017.
The bank's loans & advances to customers at December 31 were 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 customer deposits in 2018 were flat at GBP416 billion.
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.
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."
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