22 February 2024
If you are covering Lloyd’s Banking Group’s latest results, please the following comment from Will Howlett, financials analyst at Quilter Cheviot:
“Lloyds Banking Group reported mixed results for the fourth quarter and full year 2023, with some positive signs of capital return and resilience, but also some challenges from lower net interest income, higher operating costs, and regulatory uncertainty.
“The bank announced a £2bn share buyback and a 15% increase in dividend, reflecting its strong capital position and confidence in its future prospects. However, it also took a £450m charge for the FCA’s investigation into motor finance, which could lead to further provisions in the future. The bank’s net interest margin fell to 2.98%, as it faced pressure from mortgage pricing and deposit migration, while its revenue declined by 10% in the fourth quarter.
“The bank’s underlying pre-provision profit missed consensus expectations by 12%, while its underlying profit before tax was ahead, thanks to a large write back on impairments related to a single name client. The bank’s return on tangible equity for the full year was 15.8%, above the guidance of >14%. Lloyds also set out a new target of >15% for 2026 while lowering its CET1 target to 13.0% which frees up extra capital for potential distribution. The bank trades at 0.8x tangible book value and 6x PE, which we think is fair given its market position and outlook, but not compelling compared to other opportunities in the sector.”
