Lloyds profits jump 57% despite economic headwinds

Following Barclays and HSBC, Lloyds Banking Group (LSE: LLOY) has reported a 57% increase in pre-tax profits to £7.5 billion for 2023, exceeding analyst forecasts. The performance enables the bank to announce a final dividend of 1.84p per share and a £2 billion share buyback scheme.

As Britain’s largest domestic lender, Lloyds’ fortunes reflect the economy’s health. It benefited from higher net interest margins from rising Bank of England rates, offsetting a dip in guidance for 2024 returns to 13% before partially recovering by 2026.

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Provisions for potential unpaid loans fell to £308 million as Lloyds contained bad loan losses so far despite economic strains on borrowers. But compensation for historical car loan overcharging could cost up to £2 billion, according to analyst estimates. Lloyds expects a £450m hit from the FCA motor finance probe.

With muted projections ahead amid mortgage pricing pressure, Lloyds faces economic headwinds. But for now, the bank is overcoming recessionary impacts to post substantially higher profits.

Lloyds shares were down 1.5% by 08:30 GMT.