Lloyds Reports Jump in Profit, Pumps Up Dividend -- Update

By Max Colchester 

LONDON-- Lloyds Banking Group PLC said its annual net profit more than quadrupled to its highest level in a decade as the bank benefited from a steep fall in conduct costs.

Lloyds, which is two years into a three-year turnaround plan, said it would target higher margins as it continues to benefit from its dominant position in the U.K. retail-banking market.

Lloyds said revenue in 2016 was GBP17.3 billion ($21.6 billion), compared with GBP17.4 billion a year earlier, hit by lower interest rates. Net profit came in at GBP2 billion.

One major boost for Lloyds's bottom line: The bank was spared having to put more money aside in the final quarter of the year to compensate customers who bought insurance products they didn't need. The bank did, however, have to put aside GBP475 million cover off a range of conduct issues, including the sale of packaged accounts to customers.

Shares were up 4% in morning trading.

Chief Executive António Horta-Osório said the British economy has continued to hold up well after the Brexit vote. "We have not seen any change," he said.

Over the past year, the U.K. government has cut its Lloyds stake to below 5%, marking another step toward normalization for the retail bank following its bailout in 2009. This was reinforced in December when Lloyds announced it was buying Bank of America Corp.'s U.K. credit-card business MBNA Ltd. for GBP1.9 billion, its first major acquisition since the bailout. Mr. Horta-Osório said the bank wasn't planning any more major deals but would look at loan portfolios if they came up for sale.

Lloyds said it would pay a total ordinary dividend of 2.55 pence a share, up 13% on the year before. The bank also presented a special dividend of 0.5 pence a share.

The bank said it was leaning toward creating a hub in Berlin for its European operations post-Brexit. As a mostly U.K.-centric bank, it would have to move very little activity, and would simply convert its existing Berlin branch into a subsidiary and no staff would be transferred.

Despite the strong profit, Mr. Horta-Osório's bonus was cut by just over GBP3 million, to GBP5.5 million, in part because the bank's shares fell steeply last year after the June Brexit vote. Mr. Horta-Osório played down ideas that he might call time on his six-year tenure at the bank. "The job is never done," he said.

Write to Max Colchester at [e-mail]

(END) Dow Jones Newswires

February 22, 2017 04:11 ET (09:11 GMT)

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