Lloyds Banking Group PLC (LSE:LLOY) joined other major banks in posting sharply higher profits for 2021, boosted by the release of loan loss provisions originally set up to cover defaults during the pandemic , and announcing an exceptional stock buyback program for the current year.
Pre-tax profit for the year to 31 December 2021 was £6.9bn, up from £1.2bn the previous year, as the improving economic outlook in the UK led to a net underlying impairment credit of £1.2 billion compared to a charge of £4.2 billion in 2020, Lloyds said in its earnings release.
Net income rose 9% to £15.8bn, with underlying net interest income increasing 4% to £11.2bn.
The bank has proposed a final dividend of 1.33p per share, bringing the total payout for 2021 to 2p, and announced plans for a £2bn share buyback program which is expected to be completed by end of 2022.
Customer loans rose by £8.4bn to £448.6bn last year, driven by mortgages, which saw their highest growth rate in a decade, rising from £16 billion to £293.3 billion.
Customer deposits increased by £25.6bn to £476.3bn, including a 14% increase in retail current accounts to £111.5bn.
The bank said operating costs rose 1% to £7.6billion and revealed repair costs related to past wrongdoing rose to £1.3billion across the whole of the year, with £775m in the fourth quarter. The charges stem from a number of pre-existing legacy issues and include £790million relating to historic fraud at HBOS Reading, which reflects Lloyds’ estimate of its full liability, although significant uncertainties remain, noted the bank.
Looking ahead, Lloyds chief executive Charlie Nunn said the COVID-19 pandemic continues to impact people and businesses and that despite signs of economic recovery, inflationary pressures and risk new virus variants mean the outlook remains uncertain.
“As we look to 2022, we are seeing a rapid recovery and the macroeconomic outlook is improving, supported by the successful deployment of the vaccine in the UK,” he said.
“While the outlook remains uncertain, particularly with regard to new virus variants, as well as the impact of inflation on the economy and households, I am confident that the group is well positioned to generate returns. increased while helping Britain prosper, as evidenced by our new strategy.
Lloyds seeks to “deepen relationships with our existing customers, consumers and businesses of all sizes, and meet more of their financial needs by making our great products more relevant to them and our channels simpler and more personalized to use”, said Nunn said.
The bank projects a return on tangible equity (RoTE) of around 10% for 2022 and targets a RoTE above 10% by 2024 and above 12% by 2026.
It projects around £700million in additional revenue by 2024 and more than double £1.5billion by 2026.