Shares of Lloyds Banking Group surged three per cent at market opening, notwithstanding a diminution in profit after the banking institution earmarked extra provisions for possible motor finance reimbursements.
The FTSE 100 bank announced a pre-tax profit decline of 20 per cent to £6bn, a decrease from £7.5bn recorded in 2023, as reported by .
Analyst predictions had set the bank's profit before tax at an anticipated 13 per cent fall to £6.5bn. Furthermore, pre-tax profit significantly dipped to £824m in the fourth quarter, marking a steep 55 per cent fall from the £1.8bn accrued in the preceding third quarter.
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Additional provisions totalling £700m have been allocated by Lloyds pertaining to the motor finance scandal, atop the £450m set aside back in February 2024. This new allocation surpasses the amounts reserved by rival banks; with Santander having allocated £295m in November 2024, and Barclays setting aside £90m last week for potential settlements.
The provisions resultant from motor finance commission has affected the bank’s return on tangible equity, initially at 14 per cent but reduced to 12.3 per cent post the provision charge.
John Moore, senior investment manager at RBC Brewin Dolphin stated: "Lloyds is rounding off the major 海角视频 banks' results with lower numbers than the market expected.
"Among its peers, Lloyds is the most exposed to the 海角视频, and mortgage lending in particular – motor finance provisions, falling interest rates, and a sluggish housing market were always going to be immediate challenges."
Yet, Moore observed that despite these factors, Lloyds still maintains a "good position."
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Discussing the future for Lloyds Bank, a valid question emerges: "But, as ever with Lloyds, the reasonable question to ask is: what's next? The big opportunity is in what the bank refers to as 'other' income, which now accounts for £5.6 billion."
Richard Hunter, head of markets at interactive investor, remarked on the challenges faced by Lloyds, saying, "Lloyds finds itself in the midst of attacks from several angles, but all things considered is standing up defiantly to the challenges."
Hunter also highlighted the positive developments within the bank: "Overall, a positive direction of travel towards a more streamlined and digital business, underpinned by a healthy financial position, are elements of proof that the bank remains on track."
He noted the impact these factors have had on investor sentiment, "Despite the headwinds, the shares have been positively rerated of late and have added 47% over the last year, as compared to a hike of 13% for the wider FTSE100."
In an assertive move despite a decrease in income, Lloyds has confirmed it will initiate a share buyback programme valued at up to £1.7bn. Additionally, the bank declared an increased total ordinary dividend of 3.17 pence per share, signifying a 15% rise from the previous year.
Gary Greenwood from Shore Capital commented on the buyback announcement, indicating confidence within the bank's management: "Given the shares are up 50% over the past year and there is no underlying upgrade to guidance, we would expect a fairly muted share price reaction today."
In other financial metrics, Lloyds reported its net interest margin had contracted by 16 basis points over the last year to 2.95%, in line with its full-year expectations.
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Earnings per share have seen a decline, settling at 6.3p—a drop of 1.3p since 2023. Against this backdrop, group chief executive Charlie Nunn expressed a positive outlook on the year's performance: "In 2024 we continued to Help Britain Prosper, delivering for our customers, shareholders and wider stakeholders."
Moreover, Nunn provided an optimistic view on the future, stating, "Looking forward, we are building momentum as we enhance our franchise and deliver differentiated outcomes for our customers."
He elaborated on the strategic direction, saying, "Our strategy is transforming our capabilities, enabling us to deepen relationships with our customers, grow in high value areas and drive cross-Group collaboration."
Demonstrating confidence in their trajectory, Nunn concluded with a solid financial forecast, asserting, "We are confident of generating more than £1.5bn of additional income from our strategic initiatives by 2026 as we build towards higher, more sustainable returns."