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Lloyds Banking Group profits surge on higher income, credit loss release 


Lloyds Banking Group PLC (LSE:LLOY) joined other big banks in posting sharply increased profits for 2021, boosted by the release of credit loss provisions initially set aside to cover defaults during the pandemic, and in announcing a bumper share buyback programme for the current year. 

Pre-tax profits for the year to 31 December 2021 came in at £6.9bn, up from £1.2bn the year before, as an improved economic outlook in the UK led to a net underlying impairment credit of £1.2bn compared with a £4.2bn charge in 2020, Lloyds said in its earnings release. 

Net income grew by 9% to £15.8bn, with underlying net interest income rising by 4% to £11.2bn. 

The bank proposed a final dividend of 1.33p per share, taking the full payout for 2021 to 2p, and announced plans for a £2bn share buyback programme expected to be completed by the end of 2022. 

Customer lending increased by £8.4bn to £448.6bn last year, driven by mortgage lending, which saw its highest rate of growth in a decade, up by £16bn to £293.3bn. 

Customer deposits were up by £25.6bn to £476.3bn, including a 14% increase in retail current accounts to £111.5bn. 

The bank said operating costs rose by 1% to £7.6bn and revealed that remediation charges relating to past misdeeds increased to £1.3bn in the year as a whole, with £775mln in the fourth quarter. The charges stem from a number of pre-existing legacy issues and include £790mln relating to historic fraud at HBOS Reading, which reflects Lloyds’ estimate of its full liability, although significant uncertainties remain, the bank noted. 

Looking ahead, Lloyds chief executive Charlie Nunn said the COVID-19 pandemic continues to have an impact on people and businesses and despite signs of economic recovery, inflationary pressures and the risk of new virus variants mean the outlook remains uncertain.  

“As we look forward into 2022, we are seeing early recovery and the macroeconomic outlook is improving, supported by the successful vaccine roll out in the UK,” he said. 

“Although the outlook remains uncertain, particularly with regards to new virus variants, as well as the impact of inflation on the economy and households, I am confident that the group is well-placed to deliver increased returns whilst Helping Britain Prosper, as embodied in our new strategy.”

Lloyds is looking 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,” Nunn said.

The bank forecast return on tangible equity (RoTE) of around 10% for 2022, and is targeting RoTE in excess of 10% by 2024 and above 12% by 2026. 

It expects additional revenues of around £700mln by 2024 and more than double that of £1.5bn by 2026. 

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