Lloyds Banking Group Plc - 2018 Results

Significant business progress with strong start to the Group's latest strategic plan

·    Strong start to the next phase of our strategy with increased strategic investment

·    Achievements during the year include the launch of Open Banking, Single Customer View, Lloyds Bank Corporate Markets, the wealth management partnership with Schroders and enhanced customer propositions

·    The Group will continue to Help Britain Prosper whilst delivering strong and sustainable returns for shareholders

 

Strong and sustainable financial performance with continued growth in profit and returns

·    Statutory profit after tax of £4.4 billion up 24 per cent with a 6 per cent increase in underlying profit to £8.1 billion

·    Total ordinary dividend of 3.21 pence per share, up 5 per cent on 2017, and a proposed share buyback of up to £1.75 billion representing a total capital return of up to £4.0 billion (2017: £3.2 billion), increase of up to 26 per cent

·    Net income of £17.8 billion, 2 per cent higher, with net interest margin higher at 2.93 per cent

·    Operating costs down on prior year despite increased investment; cost:income ratio further improved to 49.3 per cent with positive jaws of 5 per cent

·    Credit quality remains strong with no deterioration in credit risk; gross asset quality ratio remains stable at 28 basis points, in line with full year 2017 and 2016

·    Return on tangible equity increased to 11.7 per cent and earnings per share of 5.5 pence up 27 per cent

·    Balance sheet strength maintained with capital build of 210 basis points in the year and CET 1 ratio of 13.9 per cent after dividends and share buybacks

·    Tangible net assets per share of 53.0 pence, up 1.3 pence after the payment of dividends in the year

 

Guidance demonstrates confidence in continued strong performance

·    Continue to expect increased statutory return on tangible equity of 14 to 15 per cent in 2019 with strong underlying profit and lower below the line charges driving statutory profit growth

·    Ongoing capital build of 170 to 200 basis points per annum

·    Net interest margin of c.2.90 per cent in 2019 and, as previously guided, resilient through the plan period

·    Operating costs now expected to be less than £8 billion in 2019; a year ahead of original target, cost:income ratio still expected to fall every year and be in the low 40s exiting 2020 including remediation

 

 

·    Net asset quality ratio expected to be less than 30 basis points in 2019 and through the plan period

INCOME STATEMENT − UNDERLYING BASIS

 

 

 

 

 

 

 

 

 

 

 

 

 2018 

 

 2017 

 

Change

 

 

    

£m 

    

£m 

    

%

 

 

 

 

 

 

 

 

Net interest income

 

 

 12,714 

 

 12,320 

 

3

Other income

 

 

 6,010 

 

 6,059 

 

(1)

Vocalink gain on sale

 

 

 - 

 

 146 

 

 

Operating lease depreciation

 

 

 (956) 

 

 (1,053) 

 

9

Net income

 

 

 17,768 

 

 17,472 

 

2

Operating costs

 

 

 (8,165) 

 

 (8,184) 

 

-

Remediation

 

 

 (600) 

 

 (865) 

 

31

Total costs

 

 

 (8,765) 

 

 (9,049) 

 

3

Impairment

 

 

 (937) 

 

 (795) 

 

(18)

Underlying profit

 

 

 8,066 

 

 7,628 

 

6

Restructuring

 

 

 (879) 

 

 (621) 

 

(42)

Volatility and other items

 

 

 (477) 

 

 (82) 

 

 

Payment protection insurance provision

 

 

 (750) 

 

 (1,650) 

 

55

Statutory profit before tax

 

 

 5,960 

 

 5,275 

 

13

Tax expense

 

 

 (1,560) 

 

 (1,728) 

 

10

Statutory profit after tax

 

 

 4,400 

 

 3,547 

 

24

 

 

 

 

 

 

 

 

Earnings per share

 

 

5.5p

 

4.4p

 

27

Dividends per share - ordinary

 

 

3.21p

 

3.05p

 

5

Share buyback

 

 

2.46p

 

1.40p

 

76

Share buyback value

 

 

£1.75bn

 

£1bn

 

75

 

 

 

 

 

 

 

 

Banking net interest margin

 

 

2.93%

 

2.86%

 

7bp

Average interest-earning banking assets

 

 

£436bn

 

£435bn

 

-

Cost:income ratio

 

 

49.3%

 

51.8%

 

(2.5)pp

Cost:income ratio excluding remediation

 

 

46.0%

 

46.8%

 

(0.8)pp

Asset quality ratio

 

 

0.21%

 

0.18%

 

3bp

Underlying return on tangible equity

 

 

15.5%

 

14.0%

 

1.5pp

Return on tangible equity

 

 

11.7%

 

8.9%

 

2.8pp

 

 

 

 

 

KEY BALANCE SHEET METRICS

 

 

 

 

 

 

 

 

 

 

 

 

At 31 Dec

 

At 1 Jan

 

 

 

 

 

2018

 

2018

 

Change

 

 

 

 

 

(adjusted)1

 

%

 

 

 

 

 

 

 

 

Loans and advances to customers2

 

 

£444bn

 

£444bn

 

-

Customer deposits3

 

 

£416bn

 

£416bn

 

-

Loan to deposit ratio

 

 

107%

 

107%

 

-

Capital build4

 

 

210bp

 

244bp

 

(34)bp

Pro forma CET1 ratio5

 

 

13.9%

 

13.9%

 

-

Pro forma transitional MREL ratio5

 

 

32.6%

 

26.0%

 

6.6pp

Pro forma UK leverage ratio5

 

 

5.6%

 

5.4%

 

0.2pp

Risk-weighted assets

 

 

£206bn

 

£211bn

 

(2)

Tangible net assets per share

 

 

53.0p

 

51.7p

 

1.3p