Lloyds Banking Group
RESULTS FOR THE FULL YEAR
“In 2019 the Group has continued to make significant strategic progress while delivering solid financial results in a challenging external market. The Group's statutory performance was impacted by a substantial PPI charge related to the deadline for claims submission. Underlying performance was resilient, reflecting the health of our customer franchise and the strength of the business model.
The Group's purpose is to Help Britain Prosper, underpinned by being the bank with the largest retail and commercial presence throughout the UK. In 2019 we helped around 23 per cent of first time buyers by lending £13.8 billion while also achieving our target of lending £18 billion to businesses across the UK. We have also targeted reducing the emissions we finance by more than 50 per cent by 2030, in line with the UK's Net Zero Goal and the Paris Agreement.
Given our clear UK focus, our performance is inextricably linked to the health of the UK economy. Throughout 2019, UK economic performance has remained resilient in the face of significant political and economic uncertainty, supported by record employment, low interest rates and rising real wages. Although uncertainty remains given the ongoing negotiation of international trade agreements, there is now a clearer sense of direction and some signs of an improving outlook. We remain well placed to Help Britain Prosper, support our customers and deliver strong and sustainable returns for shareholders.”
António Horta-Osório
Group Chief Executive
Significant strategic progress and the right strategy in the current environment
In 2018 we launched our ambitious strategy to transform the Group for success in a digital world; over the last two years we have invested £2 billion in strategic initiatives and:
- Invested in building a leading customer experience, including the Group's unique Single Customer View, supporting the largest digital bank in the UK with 16.4 million digitally active customers and 10.7 million mobile app users, alongside the largest branch network in the UK
- Enhanced comprehensive product range and maximised Group capabilities by launch of Schroders Personal Wealth
- Continued to digitise the Group and transform ways of working
Solid financial performance
Underlying profit of £7.5 billion, down 7 per cent in a challenging external market
- Net income of £17.1 billion, down 4 per cent, with stable average interest-earning banking assets of £435 billion, net interest margin of 2.88 per cent and other income down 5 per cent to £5.7 billion
- Total costs of £8.3 billion further reduced by 5 per cent, driven by action to reduce operating costs, and lower remediation charges; market-leading cost:income ratio improved to 48.5 per cent with positive jaws of 1 per cent
- Credit quality remains strong with net asset quality ratio of 29 basis points
Statutory profit after tax of £3.0 billion after £2.45 billion PPI charge and £1.4 billion tax expense in the year
Total ordinary dividend of 3.37 pence per share, up 5 per cent
Balance sheet strength maintained with free capital build of 86 basis points in the year (207 basis points pre-PPI charge) and CET1 ratio of 13.8 per cent after dividends
The Group is targeting an ongoing CET1 capital ratio of c.12.5 per cent plus a management buffer of c.1 per cent.
Sustainable growth in targeted segments including £1.0 billion in UK Motor Finance, £0.3 billion in SME and £3.2 billion in Retail current accounts, as well as growth of £3.5 billion in the open mortgage book, including the Tesco acquisition
Underlying return on tangible equity remains strong at 14.8 per cent with statutory return on tangible equity at 7.8 per cent, largely driven by the PPI charge
Guidance for 2020 reflects the Group's confidence in the business model and future performance
Net interest margin of 2.75 to 2.80 per cent
Operating costs to be less than £7.7 billion with the cost:income ratio lower than in 2019
Net asset quality ratio expected to be less than 30 basis points
Capital build expected to be within the Group's ongoing guidance range of 170 to 200 basis points per year and risk-weighted assets to be broadly in line with 2019
Expect increased statutory return on tangible equity of 12 to 13 per cent, driven by resilient underlying profit and lower below the line charges