Annual profits

Bank of Scotland owner Lloyds sees annual profits soar to nearly £7billion

The group – the UK’s biggest mortgage lender – reported pre-tax profits of £6.9bn in 2021, up from £1.2bn the year before, although that figure was below City hopes.

Lloyds said results were improved as it set aside a £1.2billion credit against bad debt provisions, after setting aside £4.2billion the previous year, while benefiting also from a boom in demand for mortgages. Its mortgage portfolio jumped by £16bn to £293.3bn in 2021.

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The group, which also owns Scottish Widows, said it would buy back £2bn of its own shares and pay a final dividend of £1.33 per share.

Lloyds Banking Group is one of Britain’s major banks, the country’s largest mortgage lender and is also the originator of the Bank of Scotland and Scottish Widows brands. Photo: Ian Rutherford

The figures cap a host of impressive results from major players in the industry, after annual profits of £8.4bn at Barclays, mammoth profits of $18.9bn (£13.9bn) at HSBC and £4 billion in operating profits at Royal Bank of Scotland’s parent NatWest.

But Lloyds also revealed charges for past misdeeds of £1.3bn in the year, with a hit of £775m in the fourth quarter, including £600m for the HBOS Reading scandal, which took place before the financial crisis.

Newly appointed chief executive Charlie Nunn unveiled what he called an “ambitious” strategy alongside the results, promising a “significant shift” towards growth, more diversified revenue, greater efficiency and additional investment in data and technology.

He said “2021 has been a year of strong financial performance”, adding: “I am confident that the group focus, customer focus, unique business model and significant competitive advantages, embodied in our ambitious strategy, will ensure that the group is able to deliver higher and more sustainable long-term returns and capital generation for our shareholders, while meeting the needs of wider stakeholders.

John Moore, Chief Investment Officer at Brewin Dolphin, the wealth management firm, said: “Lloyds has delivered strong results; although slightly lower than expected, with historical issues driving up costs.

“The bank’s results follow similarly strong figures from NatWest, Barclays and HSBC, pointing to a healthy banking sector generally.

“With an already relatively healthy net interest margin and enough capital to buy back its own shares, Lloyds is doing well – but historically its fate has been largely linked to the performance of the UK property market, the outlook for which currently divides the ‘opinion.

“The performance of its other divisions, together with greater diversification, may prove essential in supporting Lloyds’ recovery.”

Freetrade senior analyst Dan Lane said: “Shareholders have given UK banks a free pass after a fairly bleak few years, but this cannot last forever and the market needs to see proactive signs from the sector indicating that it returns to normal.

“Lloyds’ position at the top of the lending tree also means shareholders are eyeing a year of rate hikes and expecting even higher net interest margins from the bank.”

He added: “This year could really split the pack between those who get a lot of revenue from their business divisions and those for whom an interest rate hike could be a real boon.”

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