Lloyds Banking Group has reported its highest annual profit in a decade, helped by a reduction in payment protection insurance (PPI) provisions.
Pre-tax profits increased by 158% to £4.24bn, a level last seen in 2006 before the financial crisis. Provisions for PPI declined from £4bn to £1bn. The UK government’s stake in Lloyds has now fallen below 5% and it has said it wants to return the bank to full private ownership this year. The government spent £20.3bn to acquire a 43% stake in Lloyds at the height of the financial crisis. It has returned more than £18.5bn to the taxpayer since 2009.
However, underlying profits fell to £7.9bn, down from £8.1bn. Total income for the group also edged down to £17.5bn compared with £17.6bn the previous year. The company has increased its dividend by 13% and will also pay a special dividend. Lloyds, which is the UK’s biggest retail banking group, also owns the Halifax and HBOS brands. “Given our UK focus, our performance is inextricably linked to the health of the UK economy which has been more resilient than the market expected post referendum, with GDP growth of 2% in 2016,” said group chief executive Antonio Horta-Osorio. “The UK’s decision to leave the European Union means the exact nature of our relationship with Europe going forward remains unclear and the economic outlook is uncertain. “However, the recovery in recent years with low unemployment, reduced levels of household and corporate indebtedness and increased house prices means the UK is well positioned,” he added.