While the wider market has fallen sharply due to war in Ukraine, weak full-year results from Lloyds (LLOY) would likely have received a negative market reaction regardless.
The stock is down 9.1% to 47.4p, falling more than the wider market and its immediate peer group. The quantum of the fall is more than double that of the 4.4% decline seen in NatWest (NWG) shares, for example.
The bank may have reported a rise in profit, underpinned by higher income and reversal of credit impairments but earnings were still short of expectations and the company announced lots of new expenditure as part of a restructuring plan.
More positively Lloyds also boosted its dividend and unveiled a £2 billion share buyback programme.
For the year ended 31 December 2021, pre-tax profit rose to £6.9 billion from £1.22 billion as net income grew 9% to £15.8 billion. However, this compared with a consensus forecast of £7.2 billion.
The net interest margin, a key measure of banks' profitability, was 2.54%, up from 2.52%. The return on tangible equity rose 2.3% to 13.8%.
MULTI-BILLION POUND CAPITAL RETURN
Given the total ordinary dividend of 2.00p per share, up from 0.57p, and the intended ordinary share buyback, equivalent to up to 2.82p per share, the total capital return in respect of 2021 would be up to 4.82p per share, equivalent to £3.4 billion, the company said.
Looking ahead, Lloyds is targeting net interest margin above 260 basis points for 2022 and a return on tangible equity of about 10%.
Shore Capital analyst Gary Greenwood said: ‘Lloyds has published full year results to 31 December 2021 that show weaker than expected earnings due higher than expected remediation costs (HBOS Reading) and restructuring charges (software intangible write down).
‘On a more positive note, the group has announced a larger than expected share buyback. The new strategy will “drive revenue growth and diversification” while “focusing on strengthening cost and capital efficiency” by “maximising the potential of people, technology and data”.
‘Importantly, this will see incremental investment of £3 billion over the next three years and £4 billion over the next five years.’
