Lloyds, the British retail, and the commercial bank has more than doubled its annual pre-tax profit to £4.2 billion on the back of lower provisions for misselling payment protection insurance and has revealed a £2.2 billion dividend payout. The bank is now less than 5 percent owned by the UK government, set aside £1 billion for the PPI debacle last year, compared to a total bill of £4 billion in 2015. The pretax profit, up from £1.6 billion a year earlier, the undershot analyst evaluates of £4.4 billion.
The sharp decline in misselling costs is a boon to shareholders, who have seen consecutive profit announcements hit by the PPI scandal. The bank’s total compensation pot amounts to £17 billion. Lloyds has also announced a special 0.5p dividend on top of a 2.55p ordinary dividend in respect of 2016 amounting to a £2.2 billion payout. The results bolster government plans for offloading its remaining stake over the next few months, drawing a line under the financial crisis some eight years after Lloyds’ £20.5 billion bail-outs. Stripping out the impact of PPI and other one-off items, Lloyds delivered an underlying profit of £7.9 billion, down from £8.1 billion in 2015.
The bank said income amounted to £17.5 billion, in comparison to £17.6 billion the year before, while operating costs reached £8 billion, fallen from £8.3 billion. Lloyds eased off mortgage lending last year to preserve its net interest margin – the difference between the interest it receives from lending and what it pays out on savings. The bank posted a NIM of 2.71 percent, up from 2.63 percent the year before.
António Horta-Osório, the bank’s chief executive, is focused on growing in consumer credit and other sectors where it is under-represented relative to its size. Lloyds struck a £1.9 billion deal to acquire UK cards business MBNA at the end of last year. Lloyds said at the time the deal would hit capital reserves by 0.8 percentage points, which the bank has revealed it earmarked in the fourth quarter. The bank strengthened its capital reserves, bolstering the common equity tier one ratio to 13.8 per cent post dividend, from 13 percent at the end of 2015.