Lloyds Banking Group plc (LON:LLOY) has put in a "pretty robust" performance today with its interims, suggests Wilson King Investment's Richard Hunter.
Statutory pre-tax profit was £4.2bn in the year to December 31, more than double the £1.6bn recorded a year earlier, and the highest figure for a decade, but was still below analysts’ estimates of £4.4bn.
The lender, which once formed the basis of any income seeking portfolio and was bailed out in 2008, raised the ordinary dividend 13% to 2.55p from 2.25p and recommended a special divi of 0.5p per share.
The group said it expects ordinary dividends to increase "over the medium term" with a dividend payout ratio of at least 50% of sustainable earnings.
Hunter told Proactive that after careful stewardship from Horta-Osorio over the last few years, Lloyds was looking now like a "fairly stable bank".
"There's a lot of work going on in the background. Obviously, the fact that the government's stake is now below 5% is also helpful because it means there is less of a distraction there."
Today's results, however, showed that impairment charges, rose to £645mln from £568mln, which the firm said was due to a reduction in the level of provision releases and write-back. Underlying profit dropped to £7.8bn from £8.1bn, reflecting these.
Hunter noted the increase of impairments - 14% up year-on-year - was "slightly" troubling seeing as interest rates were currently low and it threw a question mark up as to what would happen if rates were to rise. Borrowers can of course struggle in that scenario.
Lloyds shares are up almost 3% to 69.18p on the day and have risen from around 62p at the end of the year.