Interactive Investor

ii view: income play Lloyds Bank confident for the long term

A robust balance sheet, an attractive estimated future dividend yield and enhancing its green credentials. Buy, sell, or hold?

11th August 2023 11:54

Keith Bowman from interactive investor

First-half results to 30 June

  • Net income up 17% to £9.3 billion
  • Pre-tax profit up 23% to £3.87 billion
  • Interim dividend up 15% to of 0.92p per share
  • Capital cushion or CET1 ratio stable at 14.2%

Chief executive Charlie Nunn said: “We know that rising interest rates, cost-of-living pressures and an uncertain economic outlook are proving challenging for many people and businesses. The group delivered a robust financial performance in the first half of 2023 with strong net income and capital generation alongside resilient asset quality.

“We continue to make good progress on delivering our strategic initiatives. Combined with our franchise resilience, this better positions us to support our customers, both today and in the future.”

ii round-up:

Built on its acquisition of HBOS during the 2008 banking crisis, Lloyds Banking Group (LSE:LLOY) today is home to household brand names including Lloyds Bank itself, Halifax, Bank of Scotland, MBNA, Scottish Widows and Birmingham Midshires.  

It operates through the three core divisions of Retail, Commercial Banking and Insurance, Pensions, and Investments.

For a round-up of these latest results announced on 26 July, please click here.

ii view:

Operating largely in the UK, Lloyds employs around 58,000 people, servicing approximately 26 million customers across 16 different brand names. Competing against rivals including Barclays (LSE:BARC), NatWest Group (LSE:NWG) and HSBC Holdings (LSE:HSBA), its core strategy aims are to grow revenues from diversifying sources, strengthen its cost and capital efficiency, and maximise the potential of technology, data and people. 

For investors, the tough and challenging economic backdrop has resulted in additional bad-debt provisions. Costs generally for businesses remain elevated, competition across the sector including for mortgages and deposits is intense, while the cooling in UK housing market activity could drag on future lending volumes.  

On the upside, the bank’s balance sheet remains robust, with its capital cushion or CET1 ratio of 14.2% ahead of management’s comfort target of 12.5%. Increased costs have been more than countered by rising income given higher interest rate income. Its push towards digitalisation and focus on the corporate business is ongoing, while its green credentials were recently enhanced by the acquisition of Tusker, the electric vehicles and ultra-low emissions vehicle management and leasing company. 

For now, and while some caution looks sensible, an estimated future dividend yield of over 6% should keep income investors, at least, happy.  


  • Brand diversity
  • Attractive dividend (not guaranteed) 


  • Uncertain economic outlook
  • Lacks the geographical diversity of some other banks

The average rating of stock market analysts:


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