Lloyds Banking Group PLC (LSE:LLOY) saw profits drop by a fifth last year and set aside a further £700 million in the final quarter to cover a potential hit from motor finance mis-selling.
Statutory pre-tax profit tumbled 20% to £5.97 billion in the year to December 31, the lender said on Thursday, well below consensus expectations for £6.39 billion.
Underlying net income slipped 7% to £12.85 billion in the meantime, while rate cuts saw its banking interest margin drop from 3.11% to 2.95%.
Lloyds also unveiled additional provisions in the final quarter against possible remediation from a probe in historic motor finance commission agreements to bring the total set aside to cover the potential hit to £1.15 billion. Lloyds said this was its “best estimate” of the impact ahead of the latest Supreme Court hearing next month.
A new £1.7 billion buyback was unveiled as the flagging profits still remained large, while a 2.11p per share final dividend was declared to take the full-year payout to 13.17p and up 15%.
For the year ahead, Lloyds said underlying net income of £13.5 billion was expected, alongside an increase in operating costs from £9.4 billion to £9.7 billion.