Lloyds Banking Group has defended its decision to return £4 billion to shareholders despite mounting concerns about the potential impact of Brexit.
George Culmer, its finance chief, insisted that Lloyds, which conducts more than 95 per cent of its business in Britain, was “not at all” complacent in deciding to raise its dividend and return as much as £1.75 billion of capital to investors through a share buyback.
He made the comments as Lloyds published its results for 2018, which missed market expectations. Lloyds posted a 24 per cent rise in annual net profits to £4.4 billion, about £200 million less than analysts had forecast. Pre-tax profits rose by 13 per cent to almost £6 billion.
Lloyds is Britain’s biggest mortgage lender and a leading credit card provider, making it a bellwether for the UK economy. Like other banks, it would be hit if the UK were to crash out of the European Union next month without a deal.
António Horta-Osório, 55, its chief executive, said that Lloyds was basing its assumptions on Britain breaking the political deadlock over the terms of its exit and agreeing an orderly departure. “We are planning for a deal and smooth Brexit transition,” he said.
Mr Culmer, 56, said that the decision to hand back capital reflected management’s confidence for 2019. “We are not complacent at all about the economic conditions and some of the uncertainties that exist,” he said.
Nevertheless, the bank struck a more upbeat tone than either HSBC or Royal Bank of Scotland, both of which were more cautious when they unveiled their results. On Tuesday HSBC made a $165 million provision to cover any Brexit disruption.
Lloyds missed forecasts on net profits after its insurance operations were affected by the market sell-off that rattled other banks at the end of last year. The business took a £236 million hit in the fourth quarter as a result of falling stock markets and widening credit spreads.
Lloyds shares rose 2¾p, or 4.7 per cent, to 61¼p on news of the cash return. It includes a final ordinary dividend of 2.14p a share, which lifted the total payout for the year to 3.21p, as well as share repurchases equivalent to up to 2.46p per share. Together, Lloyds will have returned about £4 billion for 2018.
Lloyds’ common equity tier one ratio, a measure of a bank’s strength, was unchanged over the year at 13.9 per cent.
The lender set aside a further £200 million in the final quarter to cover the cost of payment protection insurance claims. This took Lloyds’ PPI bill for the year to £750 million and its total for the mis-selling scandal to more than £19.4 billion.
Lloyds also disclosed that Mr Horta-Osório’s total pay fell to £6.27 million from £6.43 million in 2017 after he received fewer share awards last year.
Under Mr Horta-Osório, Lloyds has pushed further into credit cards with its acquisition of MBNA and financial planning through a joint venture with Schroders, which Lloyds said would be branded Schroders Personal Wealth.
• Standard Chartered has been fined £102.2 million by the Financial Conduct Authority in relation to the bank’s historical financial crime controls. In a filing to the Hong Kong Stock Exchange last night, it said it was considering its options. It will take a $900 million provision in its fourth-quarter results.
Source The Times 21st February 2019