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Lloyds Banking Group

Lloyds sees 2018 profits miss forecasts after a weak fourth-quarter but still hikes dividend, launches share buyback

The FTSE 100-listed bank reported statutory profit after tax of £4.4bn for the year to 31 December 2018, below the consensus estimate of £4.6bn but up 24% on 2017’s £3.5bn

Lloyds Bank sign
But for the fourth-quarter, Lloyd’s statutory profit after tax halved to £736mln, down from £1.47bn

Lloyds Banking Group PLC (LON:LLOY) shares rose on Wednesday even though the lender's 2018 profits missed forecasts after a weak fourth-quarter as it still increased its dividend and announced a £1.75bn share buyback.

The FTSE 100-listed bank reported statutory profit after tax of £4.4bn for the year to 31 December 2018, below the consensus estimate of £4.6bn but up 24% on 2017’s £3.5bn.

READ: Lloyds appoints Morgan Stanley banker William Chalmers as its chief financial officer

Britain's biggest mortgage lender saw its net income rise by 2% in 2018 to £17.8bn, with its net interest margin higher at 2.93%.

The group said its operating costs fell year-on-year despite increased investment, while its cost:income ratio further improved to 49.3% with positive jaws of 5%.

But for the fourth-quarter, Lloyd’s statutory profit after tax halved to £736mln, down from £1.47bn, while net income was flat at £4.35bn.

Provisions for payment protection insurance (PPI) compensation also continued to be made, with the company setting aside another £200mln in the fourth-quarter, having not made any further provisions in the third-quarter.

Cash returns please

António Horta-Osório, the bank’s group chief executive commented: “2018 has been a year of strong strategic and financial delivery, as we build on our unique capabilities to transform the Group to succeed in a digital world.

“We have made significAnt progress against the priorities we set out at the start of the year when we launched the third stage of our strategic plan, which is supported by investment of more than £3bn over the plan period.”

Lloyds said it will pay a total ordinary dividend for 2018 of 3.21p per share, up 5% on 2017.

The company also proposed share buyback of up to £1.75bn representing a total capital return for 2018 of up to £4.0bn, an increase of 26% from 2017’s £3.2bn figure.

Shares higher

In early morning trading, Lloyds shares were 2.7% higher at 59.95p.

Richard Hunter, head of markets at interactive investor, commented: “Despite missing expectations at a pre-tax profit level, Lloyds is not only in rude health but also has a clear vision on where next to take the business.”

He added: “The tight control of the business has also enabled a share buyback of £1.75 billion, alongside a dividend yield of 5.4%, both of which signal management confidence in prospects.”

 -- Adds share price, analyst comment --

Quick facts: Lloyds Banking Group

Price: £0.50

Market: LSE
Market Cap: £35.11 billion
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