Lloyds Banking Group has posted a 20 per cent drop in annual pre-tax earnings for 2024, lacking Metropolis forecasts amid rising prices and one-off fees linked to the continuing motor finance fee scandal.
The FTSE 100 lender recorded earnings of £5.97 billion final yr, down from £7.5 billion in 2023 and under analyst expectations of £6.4 billion.
Lloyds’ earnings was dented by a decrease web curiosity margin — primarily the distinction between curiosity earnings from lending and the prices of funding — in an atmosphere of falling charges. The financial institution has additionally taken heavier remediation and impairment fees, together with an extra £700 million linked to disputes round undisclosed or “partially disclosed” commissions in automotive loans.
This newest set-aside brings the lender’s whole provision for attainable motor finance compensation to £1.15 billion, although Lloyds cautioned there stays “significant uncertainty” over the ultimate consequence. The cost is linked to a Courtroom of Attraction judgment involving three shoppers — Wrench, Johnson and Hopcraft — who challenged the legal responsibility of lenders when credit score brokers comparable to automotive sellers organize a hire-purchase settlement however fail to totally disclose fee particulars.
Charlie Nunn, chief government of Lloyds, famous that the £700 million provision was prompted by the attraction court docket ruling, which fits “beyond the scope of the original FCA motor finance commissions review”.
Despite these headwinds, Lloyds reported loans and advances to clients rose by £10.2 billion final yr to £459.9 billion, with UK mortgages growing by £6.1 billion. Deposits grew by £11.3 billion to £482.7 billion, reflecting strong buyer confidence within the UK’s largest excessive avenue financial institution. Encouragingly, Lloyds additionally revealed an improved financial outlook, buoyed by latest home value progress and a extra beneficial evaluation of dangers comparable to inflation and rate of interest volatility.
In accordance with Matt Britzman, senior fairness analyst at Hargreaves Lansdown, the additional £700 million provision has “clouded” what was in any other case a powerful fourth quarter. Nevertheless, Britzman highlighted that “Lloyds has managed to improve its loan quality over the course of the year, defying fears that borrowers would buckle under the pressure of persistent inflation.”
Regardless of the revenue miss, the financial institution’s share value has climbed greater than 40 per cent over the previous 12 months, reflecting a usually upbeat sector outlook and constant efficiency away from the motor finance cost.
