Reports

Lloyds Signals Recovery With Share Buyback

Tom Burroughes Group Editor London 21 February 2018

Lloyds Signals Recovery With Share Buyback

The UK lender reported stronger profits for last year and and also set out a £3 billion transformation strategy that includes investment in digital tech.

Lloyds Banking Group today reported a higher profit for 2017 and fired the starting gun on a digital transformation strategy and other moves costing a total of more than £3 billion ($4.2 billion) over the next two years.

The UK-listed lender said its statutory profit before tax was £5.3 billion in 2017, 24 per cent higher from a year earlier, with a return on tangible equity of 8.9 per cent. Underlying profit was £8.5 billion, 8 per cent higher, with an underlying return on tangible equity of 15.6 per cent.

Last year Lloyds completed the selloff of the UK government’s share stake in the business, returning fully to private hands – contrasting still with the position of Royal Bank of Scotland, which remains part-owned by the government since it was bailed out in the 2008 financial crisis. Lloyds today – confirming media reports – announced a £1.0 billion share buyback, as if to underline its rejuvenation. It announced a total ordinary dividend of 3.05 pence per share, up 20 per cent on 2016, and a share buyback of up to £1 billion representing an increase in total capital returns of up to 46 per cent. That amounts to a total capital return of up to £3.2 billion.

Explaining its 2018-2020 strategy, Lloyds said it will “further transform the group for success in a digital world….We will be investing over £3 billion in four strategic priorities: further enhancing our leading customer experience; further digitising the group; maximising the group's capabilities; and transforming ways of working”.

In its insurance and wealth arm, Lloyds said income in insurance and overall costs remained flat, with higher investment costs offset by lower business as usual costs. Underlying profit fell by 3 per cent to £939 million as a result of lower wealth income. Wealth customer deposits stood at £13.8 billion at the end of last year, unchanged from a year before. (Lloyds has sold its international private bank; it provides private banking services but figures for this area weren’t broken out in today’s report.)

Setting out its 2018-20 strategy, the bank said it expected operating costs to be less than £8 billion in 2020 and reduce its cost/income ratio into the low 40s.

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