Lloyds Banking Group to return up to £4bn to shareholders

Lloyds Banking Group has announced that it will return up to £4 billion to shareholders as it reported a 13% increase in profits.

The banking giant posted pre-tax profits of £5.96 billion for 2018 compared with £5.28 billion the year earlier.

On an underlying basis, profits rose 6% to £8.07 billion.

Lloyds hiked the dividend by 5% to 3.21p per share and proposed a share buyback of up to £1.75 billion, which represents a total return of up to £4 billion to investors.

Operating costs were relatively steady in 2018 at £8.17 billion and the company now expects costs to be less than £8 billion this year, which is a year ahead of its initial target.

Lloyds expects to increase return on tangible equity by 14% to 15% this year with strong profits and lower charges as well as a net interest margin of about 2.9%.

Chief executive Antonio Horta-Osorio warned that the outlook for the UK economy is unclear, but that in the past year the economy has been “resilient”.

He said: “Over 2018 the UK economy has proven itself to be resilient with record employment and continued GDP (gross domestic product) growth. Although the near-term outlook for the UK economy remains uncertain, our strategy continues to deliver for our customers.

“I remain confident that with our unique business model and market-leading efficiency we can continue to increase investment in customer propositions and grow our leading digital bank, whilst at the same time delivering strong financial performance and market-leading returns.”

He added that in 2018 the group “made significant progress” in its three-year strategic plan.

“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 £3 billion over the plan period”, he said.