High-street lender Lloyds Banking Group (LLOY) posted better than forecast FY25 earnings and raised its FY26 outlook. Profit topped forecasts despite a charge of almost £1 billion including motor finance compensation.
| Share price: 105.4p (+0.9%) | PE: 15.8x |
| Market cap: £61.4bn | Yield: 3.5% |
Beat and raise
Lloyds reported profit before tax of £6.7 billion, an increase of 12%, beating the consensus estimate of £6.4 billion. The bank cited higher total income and disciplined cost control for its performance.
Underlying net interest income rose 6% to £13.6 billion thanks to a rise in the net interest margin and asset growth. Fee income rose 9% to £6.1 billion driven by increased customer activity.
Meanwhile, operating costs rose just 3% to £9.8 billion thanks to ‘business-as-usual’ cost discipline. Remediation costs were £968 million, of which £800 million related to potential motor finance commission agreed in Q3.
Return on tangible equity, a key measure of profitability, was 12.9% including remediation or 14.8% excluding remediation. For FY26, the bank raised its return target to 16% against previous guidance of greater than 15%.
‘Looking ahead to 2026, our continued business momentum and strategic delivery enable us to upgrade guidance,’ commented CEO Charlie Nunn. ‘The sustained strength in performance means we are well positioned for 2026 and beyond,’ added Nunn.
Investors in Lloyds have had a bumper couple of years as falling interest rates have boosted lending and the shares. That momentum looks like continuing into 2026 with the bank’s raised guidance.
As well as an attractive dividend, which is raised 15%, buybacks have been another draw for shareholders. Having already returned over £2 billion in 2025, Lloyds is buying back another £1.75 billion of shares.
That takes the total capital return in respect of FY25 earnings to £3.9 billion. With the increase in FY26’s return target, shareholders can look forward to yet more cash back this year.
Read the press release here: https://www.lloydsbankinggroup.com/investors.html
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