ii view: Lloyds Bank prepares growth strategy update

Full-year results to 31 December

• Net income up 7% to £18.3 billion
• Pre-tax profit up 12% to £6.7 billion
• Capital cushion or CET1 ratio of 13.2%, down from 13.8% in late June
• New share buyback scheme of up to £1.75 billion from the prior year’s £1.7 billion
• Final dividend of 2.43p per share
• Total 2025 dividend up 15% to 3.65p per share

Chief executive Charlie Nunn said:

“Looking ahead to 2026 and the culmination of the five-year strategy we set out in 2022, our continued business momentum and strategic delivery enable us to upgrade guidance. 

“The sustained strength in performance means we are well positioned for 2026 and beyond. Having entered this year on a positive trajectory, I look forward to sharing more detail on the next stage of the Group's strategy, beyond the current plan, in July."

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ii round-up:

Tracing its history back to 1695, Lloyds Banking Group (LSE:LLOY) today operates across three divisions.

The Retail division generated most underlying profit in 2025 at 50% via brands including Lloyds, HBOS, Bank of Scotland and Birmingham Midshires. 

Commercial Banking, serving businesses of all sizes, came in at 38% of 2025 profits.

Lastly, Insurance, Pensions and Investments including brands such as Scottish Widows and Schroders Personal Wealth, accounted for 5% of profits, with equity investments generating most of the 7% balance. 

For a round-up of these latest results announced on 29 January, please click here.

ii view:

Lloyds Bank serves around 28 million customers across the UK via 16 different brand names. Employing approximately 65,000 people, Lloyds highlights itself as the UK’s largest digital bank with 21.5 million app users. Lloyd’s competitors include Barclays (LSE:BARC), HSBC Holdings (LSE:HSBA), Paragon Banking Group (LSE:PAG) and NatWest Group (LSE:NWG). Its three strategy objectives are growth and diversification, strengthening cost and capital efficiency, as well as delivering change focused on technology and data. 

For investors, economic outlook uncertainty includes a rapidly changing picture in relation to US trade tariffs and their possible impact on UK-based exporters. AI and its impact on financial services across the board remains difficult to predict. The bank’s diversity of geographical region and product offering such as investment banking cannot rival Barclays, while a price-to-net asset value above the three-year average may suggest the shares are not obviously cheap.

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More favourably, provisions regarding the mis-selling of motor finance now total £1.95 billion, with hopes persisting that no further provisions will be required. Management focus on cost and capital efficiency continue to be achieved, with both predicted by management to further improve through 2026. A capital cushion, or CET1 ratio in line with the group’s target offers balance sheet reassurance, while a focus on growth and strategic initiatives sees a target for annualised additional revenues raised to £2 billion by the end of 2026 from a previous £1.5 billion. 

For now, and despite ongoing risks, an expected strategy update in July and a prospective dividend yield of around 4% will likely mean this major UK bank remains a popular choice. 

Positives

• Cost savings of £1.9 billion since 2021
• Attractive dividend (not guaranteed) 

Negatives

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

The average rating of stock market analysts:

Buy