Horta-Osorio Caps Lloyds Tenure With Profit Beat, Dividends

Lloyds Banking Group Plc beat forecasts with a pretax profit of 792 million pounds ($1.1 billion) in its fourth quarter, helped by a buoyant housing market and government support for its borrowers.

Britain’s biggest mortgage lender also announced a dividend 0.57 pence per share, marking the end of a year without payouts to protect lending during the pandemic. In a sign that Covid-19 continues to ravage the economy, Lloyds set aside 4.2 billion pounds over the year for loans that could default, although this is below its previous forecast.

“Significant uncertainties remain, specifically relating to the coronavirus pandemic and the speed and efficacy of the vaccination programme in the U.K. and around the world,” Chief Executive Officer Antonio Horta-Osorio said on Wednesday, in his final months at the bank before he joins Credit Suisse Group AG as chairman.

London-listed shares rose as much as 4.5% in early trading and were 2% higher at 9:48 a.m.

Analysts at Citigroup Inc. said the bank had produced “very good results and the 2021 outcome statement is also slightly better than anticipated.”

Loans Plans

Lloyds has lent 12 billion pounds to businesses through state-backed support programs during the pandemic. The bank is in talks with the government and other lenders to set common standards for collecting these debts once repayments come due later this year, Horta-Osorio said on a call with reporters.

The bank joins rivals NatWest Group Plc and Barclays Plc in setting aside less than forecast for souring loans in the final three months of the year, while cautioning that the outlook was uncertain for the recovering British economy, which has suffered its worst recession in three centuries. U.K. mortgages, which represent two-thirds of Lloyds’ lending, continued to grow as customers reassessed their homes in the pandemic and the government offered tax breaks on sales.

Horta-Osorio Caps Lloyds Tenure With Profit Beat, Dividends

The pace of vaccinations is faster than the bank initially expected, Chief Financial Officer William Chalmers told reporters. Chalmers will step up to be interim CEO until Horta-Osorio’s permanent replacement, HSBC Holdings Plc’s wealth head Charlie Nunn, takes the role on Aug. 16.

Horta-Osorio is departing after a decade in charge, having pushed Lloyds into wealth management and insurance to diversify revenue. The overhaul during his tenure enabled the U.K. government to exit its holding in the bank, which it bailed out in the 2008 crisis.

“We are leaving a much better bank than I joined,” he said. In the past year, Horta-Osorio has overseen a better-than-expected 4% reduction in costs after scrapping bonuses, restarting layoffs and reducing real estate spending. His own pay was 22% lower than a year ago at 3.4 million pounds.

Lloyds plans to cut its office space by about a fifth by 2023, after making similar reductions over the past three years, since most staff wish to work from home at least some of the time in future.

The bank also set out targets for 2021, including:

  • Net interest margin to be in excess of 240 basis points
  • Operating costs to reduce further to about 7.5 billion pounds
  • Statutory return on tangible equity of between 5% and 7%
  • Risk-weighted assets to be broadly stable
  • Intention to resume “progressive and sustainable” ordinary dividend policy

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