Lloyds Banking Group has announced its annual profit rose by more than 50 per cent after being bolstered by higher borrowing costs.
However, the banking giant confirmed it has set aside £450million to cover potential pay outs resulting from a review into previous car finance selling practices.
According to its latest report, Lloyds made a pre-tax profit of £7.5billion during 2023 which represents a 57 per cent compared with the year before.
This came in ahead of analysts’ expectations and was reached as the banking group’s underlying net interest income rose by five per cent to £13.8billion.
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Lloyds Banking Group reported a rise in profits for 2023
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The bank confirmed it has reserved £450million as part of a remediation charge to pay for potential costs coming out of the Financial Conduct Authority’s probe into finance selling practices going back years.
Last month, the financial services regulator opened a review into whether people could be owed money after being charged too much for car loans.
Charlie Nunn, Lloyds’ chief executive, said: “In 2023 the group remained focused on proactively supporting people and businesses through persistent cost-of-living pressures, whilst financing their ambitions and growth.
“This has come alongside strong progress on our strategy and delivering increased shareholder returns, guided as always by our core purpose of Helping Britain Prosper.”
Upon publication of its financial report, Lloyds cited higher interest rates for helping boost the banking group’s profits.
This mostly originates from the Bank of England’s decision to raise the base rate to 5.25 per cent in its fight against inflation.
For 2023, the bank gave shareholders a final dividend of 1.84 pence per share and a share buyback of £2billion.
However, shares were down by nearly two per cent in reaction to the early trading on the FTSE 100.
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The banking group has set aside £450million to handle a historic into car financing practices
GETTYFinancial services company RBC has forecast the car finance sector overall could be hit with payouts of up to £16billion if the FCA’s probe sides in favour of customers.
Matt Britzman, equity analyst at Hargreaves Lansdown, explained: “The £450million provision was less than some had feared but there will be question marks around how Lloyds has come to that figure.
"Lloyds has been honest in saying the outcome of the review is largely unknown. What we do know is that Lloyds is one of the more exposed banks should the FCA deem there was misconduct and customer loss."
Later this year, Lloyds is expected to close 123 bank branches across the country, as well as its mobile van services.