Lloyds plays down Brexit concerns as annual profits leap

● Analysts says imminent ending of PPI claims could mean more cash returned

of Scotland owner Lloyds Banking Group yesterday reported a 13 per cent increase in annual profits as it delivered a bumper pay-out for shareholders and said it will meet cost target earlier than expected.

The financial giant also shrugged off concerns about the impact of Britain’s departure from the European Union on its business.

Pre-tax profits came in at £5.96 billion for 2018 compared with £5.28bn the previous year due to lower charges for payment protection insurance (PPI) compensation.

Charges related to PPI fell to £750 million from £1.65bn in 2017, although the Scottish Widows owner did book an additional £200m charge in the fourth quarter of 2018. To date, PPI has cost Lloyds £19.4bn.

On an underlying basis, fullyear profits rose 6 per cent to £8.07bn. Lloyds hiked its shareholder dividend by 5 per cent to 3.21p per share and proposed a share buyback of up to £1.75bn, which represents a total return of up to £4bn to investors.

Chief executive Antonio Horta-osorio said: “Over 2018 the UK economy has proven itself to be resilient, with record employment and continued GDP growth.

Although the near-term outlook for the UK economy remains uncertain, our strategy continues to deliver for our customers.”

John Moore, senior investment manager at Brewin Dolphin Scotland, said: “It’s a tidy set of results from Lloyds. The bank is awash with surplus capital and some of that will be returned to shareholders through a more ambitious share buyback scheme and a 5 per cent hike in its dividend.

“Lloyds is in a good position, but the question remains ‘what’s next?’ for the bank. With PPI complaints diminishing and costs coming down ahead of expectations, Lloyds could soon have capital combank ing out of its ears looking for a useful purpose.”

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Lloyds is still in good shape, despite what its share price performance might suggest. The bank has managed to grind some extra income out of a static loan book and has controlled costs while investing to become more efficient.

“The big jump in profits can be almost all explained by falling charges for PPI compensation. To date PPI has cost Lloyds £19bn, and with the claims deadline looming in August, that’s going to be a millstone the bank will be glad to leave behind. That means more cash to shareholders.”

Pay details were also released alongside the results and showed that Horta-osorio saw his base salary rise 1.6 per cent in 2018 to £1.24m. His total remuneration fell 2.5 per cent to £6.27m due to a decline in his long-term incentive plan and lower group performance share awards for directors.

The gender pay gap narrowed by 1.3 per cent last year to 31.5 per cent, which it claims is better than the average for financial services firms.