Up 6 per cent over the year, the bank grew the value of mortgages on its balance sheet from £277.3bn to £293.3bn, according to its full-year financial results published today (February 24).
The bank therefore exceeded its £10bn lending target for first-time buyers, helping around 80,000 of these customers to get a mortgage over the year.
Lloyds also continued to clean up its closed mortgage book, reducing the book’s value by 14 per cent from £16.5bn to £14.2bn.
Shares were down around 8 per cent today, but over the past year they have climbed 20 per cent.
The bank’s pre-tax profit for the year was £6.9bn, 4 per cent below forecasts as £600mn in charges relating to historical fraud at Lloyds-owned HBOS weighed it down.
Charlie Nunn, Lloyds’ group chief executive, said the bank benefitted from continued balance sheet growth during 2021.
“Loans and advances to customers were up £8.4bn versus [the] prior year at £448.6bn, driven by strong net growth in the open mortgage book of £16bn, the strongest in over a decade,” said Nunn.
The bank praised year-round performance of the UK housing market, which saw house price growth reach 2006 levels.
Following the government’s net zero strategy published in October, which suggested banks’ green mortgage status could meet further scrutiny, Lloyds also said it intends to develop “a home ecosystem”.
This will include “integrated mortgages”, green retrofit solutions and insurance products supporting the bank’s self-set target of £10bn in green mortgage lending by 2024.
In July, the bank made its private rental debut with Citra Living. Today, Lloyds said it would focus on “scaling” this new private rental housing business over the next year.
A focus on intermediaries
While the bank suggested it had “a leading proposition and market share” when it comes to mortgages, it admitted there were opportunities to leverage its scale to grow in “under-represented intermediary products” - including protection, individual pensions and investments.
It has therefore pledged to spend £4bn over five years on sectors such as wealth management and technology, as well as on private rentals.
“By making it easier for intermediaries to do business with us, the group can deliver high quality products and services to all customer segments via reliable, low-friction, intermediated customer journeys,” it said.
We aim to become a top three protection provider by 2025.Lloyds Banking GroupThe bank intends to emulate the performance of its workplace pensions business provided through Scottish Widows. Since 2017, Lloyds said it has grown the pension provider’s market share from 10 to 19 per cent.
“In insurance, we will strengthen our intermediary offering to capture market share as we aim to become a top three protection provider by 2025,” it said.
Nunn added that Lloyds was set on deepening relationships with its existing customers - across both its retail and business arms. He said the bank would meet more of their financial needs by making its products “more relevant” to them and its channels “simpler and more personalised to use”.
He concluded: “This will set the group on a higher growth trajectory with more diversified revenue streams, while we retain our strong focus on cost and capital discipline.”
A new mass affluent offering
Last year, Lloyds’ customer deposits increased by £25.6bn to £476.3bn, which included retail current account growth of £14.1bn.
In July, Lloyds bought advised platform Embark in a £390mn deal marking its entry into the mass affluent product space.
In its results today, the bank said these types of customers are “an attractive and currently under-served segment”, acknowledging “a clear gap in the market for a digital-first, integrated offering”.
We intend to focus on the broader pool of mass affluent customers with income or wealth above £75,000.Lloyds Banking GroupThis, it said, would require supporting customers in the accumulation and decumulation stage of their lives, by joining-up services across banking, housing, pensions and investments.
“The group is uniquely placed to do this,” said the bank. “It starts with the largest mass-affluent customer base in the UK of more than 2mn customers through its banking relationships and a complete product range at scale.”
Lloyds will focus on customers with income or wealth above £75,000, building an integrated banking solution alongside scaling a separate digital wealth offering.
The Embark platform will help the bank draw all these services together. “As part of this, we are targeting an increase of over £5bn in total banking balances for our mass affluent customers by 2024,” it said.
On investments, the bank intends to reach £55bn of new open book net flows in investment and retirement products by 2024 through Embark.
ruby.hinchliffe@ft.com
