In its annual results Lloyds said it will pay an ordinary dividend of 2.25p a share, plus a special dividend of 0.5p.
Profit increased by 5% to £8.112bn or by 10% excluding TSB, leading to improved underlying return on required equity of 15%.
Lloyds said it had boosted the money set aside for PPI claims by £4bn with a £2.1bn increase in the fourth quarter. The bank also charged £745m in relation to the disposal of TSB.
Chief executive António Horta-Osório said: “Our strong strategic progress and good financial performance position the group well for future success, with our business model allowing us to respond effectively to the challenges of the lower for longer interest rate environment and the current market volatility.”
“In its full year results reported this morning, banking giant Lloyds said that profits were down 7% to £1.6bn on the back of a 1% rise in revenue,” Graham Spooner, investment research analyst at The Share Centre. “The shares were up by 9% in early trading on the back of today’s results, and after a poor recent run, this could signal that investors appear to be focussing on the prospects for dividend growth and the rise in underlying profit, which was up by 5%. The fact that the net interest margin is forecast to rise even in the wake of low interest rate, will also be an encouraging aspect for investors, alongside an encouraging view on the UK economy.”
“Despite the group pointing out that return on equity targets would be delayed by one year, it will be interesting to find out if the positive aspects of the results restore investor confidence and potentially bring back onto the table the sale of the governments remaining holding to the man on the street,” Spooner continued. “The chancellor and broking firms will be hoping the answer is yes, but it’s probably a bit too early for us at The Share Centre. As a result, we continue to recommend Lloyds as a ‘hold’ and for investors interested in the sector, our preference is HSBC.”
Once again we see Lloyds’ earnings recovery story as merely “deferred” rather than “cancelled,” added Investec’s Ian Gordon. “A Q4 2015 Reported Loss of £0.5bn primarily reflects an unsurprising £2.1bn PPI top-up, while the underlying result was, we think, broadly in line with expectations.”
The FTSE 100 also had a good morning, climbing 2.3% to 6003.
