Lloyds Banking Group reported a 57% jump in annual profit for 2023 as it generated more income from higher interest rates that continue to squeeze most UK households.
The lender reported a pre-tax profit of £7.5bn ($9.5bn ) over 2023, surging by 57% compared with the £4.8bn made in 2022.
The group – which includes Halifax, Bank of Scotland and Scottish Widows – announced a final dividend of 1.84 pence and a share buyback of £2bn. Lloyds net interest margin – the difference between what it charges for loans and pays out on savings – rose 17 basis points to 3.11%.
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Underlying pre-tax profits for the last quarter of the year slipped to £1.7bn due to mortgage pricing and deposit mix headwinds.
Lloyds’ chief executive Charlie Nunn said the group was “focused on proactively supporting people and businesses through persistent cost of living pressures” during 2023.
Charges for debts not being repaid by customers fell sharply to £308m. Customer deposits fell by £3.9bn to £471.4bn.
The bank said it set aside a remediation charge of £450m to cover potential costs related to the financial regulator’s review into historic car finance selling practices.
That suggests the bill across the whole banking sector could run into billions of pounds. Lloyds owns Black Horse, one of the biggest lenders in the car finance market.
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The bank said: “There remains significant uncertainty as to the extent of any misconduct and customer loss, if any, the nature of any remediation action, if required, and its timing. Hence the impact could materially differ from the provision, both higher or lower.”
CEO total remuneration came in at £3.7m last year, down 2% on 2022. Total GPS bonus pot for group reached £384m.
Max Georgiou, analyst at Third Bridge, said: “Lloyd’s profit beat highlights a good step towards their 2026 strategic targets, the high rate environment has been conducive to this given the more “prime” focus of their assets and liabilities.
“The FCA motor finance review could present challenges in the future, Lloyds is thought to have the largest exposure across UK peers and could present a challenge in RoTE targets moving forward.”
Watch: Lloyds Banking Group to cut 1,600 jobs as it shifts to online banking
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