Lloyds Banking Group has shrugged off growing fears over Brexit as it unveiled a £4bn payout to shareholders, despite reporting smaller-than-expected annual profits.
Britain’s biggest high street bank, which operates one out of five of the country’s branches, reported a 24% rise in net profits to £4.4bn for 2018, below the £4.6bn forecast by analysts. Statutory profit before tax was up 13% to £6bn.
Its chief financial officer, George Culmer, denied the bank was being complacent about economic conditions, as it lifted its dividend by 5% to 3.21p a share and announced a share buyback of up to £1.75bn, taking the total payout to £4bn.
Lloyds shares rose 3.6% to 60.44p on the news.
In contrast to other banks – Royal Bank of Scotland and HSBC have warned of Brexit damage in recent days – Lloyds struck a bullish tone.
Its chief executive, António Horta Osório, said: “We are planning for a deal and a smooth Brexit transition that should lead the economy to grow at around the same pace you have now of about 1-1.5%.
“Of course other scenarios can play out … It is true that we face the future with confidence, otherwise we would not be ramping up our investment in this business.”
Despite an uncertain near-term outlook, he said Britain’s economy was resilient, with record employment and low interest rates, and wage growth outstripping inflation.
Lloyds is almost halfway through a three-year plan to invest more than £3bn, mainly in digital improvements.
Despite reporting an 18% rise in impairments to £937m last year, the UK’s biggest mortgage lender did not make a provision for a potential hit from Brexit. Its rival RBS has set aside an extra £100m to cover bad loans in light of increased Brexit uncertainty, while HSBC this week increased its impairment provision by $165m (£127m) to cover credit losses.
Lloyds has been by far the worst hit of the UK banks that have mis-sold payment protection insurance (PPI) in recent years. It set aside a further £750m in 2018, including £200m in the fourth quarter.
This means the scandal has cost the bank £19.4bn since it first started taking provisions in 2011. It assumes it will receive an average of 13,000 claims a week in the coming months, with 29 August the deadline to make a claim.
The bank also said its bonus pool, of £464.5m, was 3% lower than last year. Horta-Osório received a total pay and bonus package of £6.3m in 2018, down slightly from £6.4m in 2017, while Culmer’s packet was broadly flat at £3.3m. Lloyds has increased the minimum full-time salary for all employees, which exceeds the national living wage by 7%.
