Lloyds Banking Group has enjoyed a dramatic uplift in profits after benefiting from the stronger-than-expected British economy.
The banking giant, in which the government has small stake, has seen pre-tax profits increase by 158 per cent last year, hitting £4.2bn from the £1.6bn posted back in 2015.
Lloyds staff have also received an 11 per cent increase in their annual bonus due to the strength of the bank’s performance.
According to the group chief executive António Horta-Osório, the bank’s performance was "inextricably linked” to the health of the UK economy, which has been more resilient than the market expected following the Brexit vote.
The bank said low unemployment, reduced levels of household and corporate debt and increased house prices means the UK is well positioned.
It also said the lower payment protection insurance (PPI) provisions helped boost the firm’s profits.
Mr Horta-Osório pointed to the evolving regulatory environment and said there are a number of areas where he is awaiting further clarity.
But he added: “Given the strength of our balance sheet and the capital generative nature of our business model, we are well placed to meet these regulatory requirements and the economic uncertainty.”
Last year’s strong performance means Lloyds will increase its ordinary dividend by 13 per cent and pay shareholders a special dividend.
Mr Horta-Osório said the bank is continuing to make good progress and is continuing to improve its customers' experience by simplifying the business.
The Lloyds chief added: “As a simple, low risk, UK focused bank we are committed and well positioned to help Britain prosper and become the best bank for customers and shareholders.”
In a separate note, the group also revealed that it was increasing its staff bonus to a total of £393m, up from the £354m paid out in 2015.
Lord Blackwell, the group's chairman said the bank aims to provide a clear link between remuneration and delivery of the group's objectives.
“We believe in offering fair reward where colleagues are rewarded for performance aligned to the long-term sustainable success of the business, our commitment to rebuilding trust and changing the culture of the group.”
Cash bonuses remain capped at £2,000, with additional amounts paid in shares.
Helal Miah, investment research analyst at the Share Centre, said Lloyds managed to beat expectations by reporting a rise in profits.
“The profit will undoubtedly be a boost to the British government, given that it hopes to restore Lloyds to full private ownership in the next few months after the bank was bailed out by the tax payer in the 2008 financial crisis.”
Mr Miah said income investors should be pleased after the bank announced an increased dividend, and looking ahead, he said the ongoing transformation of the business should see Lloyds deliver superior returns for shareholders.
katherine.denham@ft.com
