Lloyds profits climb 24% to record 拢5.3bn in 'landmark year'
Profits at Lloyds surged by 24% in the past year, even though the PPI mis-selling scandal continues to be a costly burden.
Wednesday 21 February 2018 14:11, UK
Lloyds Banking Group has hailed a "landmark year" as annual profits soared by 24% to a record 拢5.3bn, yet it continues to be dogged by the cost of past scandals.
The results covered a year in which Britain's biggest high street lender was fully returned to private sector ownership after its rescue during the financial crisis.
But a City watchdog campaign to reach victims of the payment protection insurance (PPI) mis-selling scandal before the 2019 deadline for claims - featuring Arnold Schwarzenegger - helped Lloyds' bill for past conduct swell to £2.5bn.
This is a £400m rise on the year before - and in the fourth quarter, it set aside an extra £600m to cover the cost of compensating victims of mis-sold PPI, with Lloyds' overall bill for the scandal now standing at £18.7bn.
The bank said its profit figure was the largest since the group was formed, when Lloyds took over troubled rival Halifax Bank of Scotland (HBOS) during the financial crisis before itself being bailed out by the Government.
Revenues rose 6% to £18.5bn.
Lloyds also confirmed plans to reward investors with a share buyback worth up to £1bn, first reported by Sky News, and a 20% increase in its total dividend. Shares rose 3%.
The results mark the latest stage in the lender's recovery under chief executive Antonio Horta-Osorio and come after the Government finally divested its remaining holdings in the business after its £20bn taxpayer rescue.
Mr Horta-Osorio said: "2017 has been a landmark year in which the group has made significant strategic progress and returned to full private ownership."
The group also revealed a rise of more than £600,000 - or 11% - in Mr Horta-Osorio's pay packet to £6.42m. His basic pay rose by £95,000 and there were hikes totalling more than £500,000 in performance bonus and long-term incentives.
Mr Horta-Osorio unveiled a new three-year strategic plan that will see Lloyds invest more than £3bn, with a focus on boosting its digital capabilities.
Laith Khalaf, senior analyst at a Hargreaves Lansdown, said: "There's a lot to like in Lloyds' numbers, with profits rising, costs under control, and prodigious amounts of cash being thrown off to shareholders.
"The Bank of England can take its fair share of credit for Lloyds' profits, as rising interest rates have delivered a boost to the top line at Lloyds.
"For the banking industry, the prospect of rising rates after a decade of loose monetary policy is a bit like finally coming across an oasis in the middle of the desert.
"With more rate rises waiting in the wings, this looks like a tailwind that's going to be blowing behind Lloyds for the foreseeable future."