Lloyds Bank to return up to £4bn to investors despite growing PPI bill

Lender said increase in PPI bill driven by higher-than-expected claims volumes last year

Caitlin Morrison
Wednesday 20 February 2019 09:55
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Lloyds Banking Group announced that it will return up to £4bn to shareholders, despite adding to its PPI bill last year.

The banking giant posted pre-tax profits of £5.96bn for 2018, up 13 per cent compared with £5.28bn the previous year.

Lloyds hiked the 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.

Operating costs were relatively steady in 2018 at £8.17bn and the company now expects costs to be less than £8bn this year, which is 12 months ahead of its initial target.

Meanwhile, the group raised the provision for PPI costs by £750m last year, bringing the total amount provided by the bank to £19.4bn.

Lloyds said the increase was driven partly by a higher-than-expected number of complaints - 13,000 per week - and a jump in the average redress per complaint.

However, analysts noted that with the deadline for PPI claims coming up this August, the banks profits have been boosted as the threat of further costs diminishes.

Looking ahead, chief executive Antonio Horta-Osorio warned that the future of 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 £3bn over the plan period,” he said.

Pay details have been released alongside Lloyds' results and showed that Mr Horta-Osorio saw his base salary rise 1.6 per cent in 2018 to £1.24m.

His total remuneration, however, fell 2.5 per cent to £6.27m from £6.43m.

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

Additional reporting by newswires

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