Lloyds throws cash at its investors in ‘landmark year’

● Lender’s profits up 24% at £5.3 billion ● £3bn investment programme to 2020

Lloyds Banking Group has unveiled a £3.2 billion bumper payout for investors, a £3bn investment programme over the next three years and handed its boss a £6.4 million pay package after reporting record annual profits.

Chief executive Antonio Horta-osorio yesterday hailed 2017 as a “landmark year” as the bank saw bottom-line profits surge 24 per cent to £5.3bn in 2017, up from £4.2bn in 2016.

The profits were lower than expected after Lloyds took another £600m hit in the fourth quarter from the payment protection insurance (PPI) mis-selling scandal.

But investors cheered a 20 per cent hike in its dividend payout to 3.05p a share and a share buyback of up to £1bn in 2018, giving a total return to Lloyds’s 2.4 million shareholders of £3.2bn – its highest ever, according to the group.

Pay details released alongout side the results also showed that Horta-osorio saw an 11 per cent increase in his total remuneration package to £6.42m, up from £5.79m.

His base salary has risen to some £1.2m from £1.1m, alongside additional increases to his long-term incentive plan and benefits. The bank said it would increase the wider staff bonus pool by about 5.5 per cent to £414.7m.

Lloyds, which came out of part-state ownership last year, also gave details of a new three-year strategic plan alongside the results, saying the £3bn investment would be mainly in further digitisation of the bank and a 50 per cent increase in staff training hours.

There will also be an added drive into long-term savings and pensions around its main Scottish Widows brand.

Horta-osorio said branch banking would remain core to Lloyds, with a market leading 20 per cent of the total branch network in the UK. But he noted that nearly 13.5 million of the group’s customers use digital banking, and did not rule further branch closures or headcount reductions.

The bank said at a news conference that cloud computing and artificial intellingence would be part of what the Lloyds boss called a “rapidly evolving” external environment.

This was aided by changes in wider society such as the increasing popularity of the likes of Amazon and Netflix with consumers, Hortaosorio added.

On jobs, Lloyds chief financial officer George Culmer said: “We are not making any special statement because it will depend on the future shape of the interactions between ourselves and our customers as we move forward.”

Horta-osorio revealed he was targeting a cost-income ratio in “the low 40s” by the end of the period, compared with just under 47 per cent now, and a return on equity of 14 to 15 per cent from 2019.

The chief executive also praised the resilience of the UK economy and said Lloyds’ plans were based on interest rates rising to 1.25 per cent by the end of 2020.