Income up, statutory earnings down at Lloyds Banking Group

The FTSE 100 bank saw underlying profit increase 5% to £8.1bn during the year, with an underlying return on equity of 15% - up from 13.6%. Excluding TSB, which Lloyds sold to Spanish bank Sabadell in July, underlying profit grew 10%.

Total income was up by 1% to £17.6bn. Of that, net interest income grew 5% to £11.5bn, which the bank said was driven by further margin improvement to 2.63%. Other income was 5% lower largely due to disposals and run-off.

Lloyds said there was some expected recovery in other income in the last quarter, despite a £60m impact from weather-related insurance claims.

Operating costs were lower at £8.3bn, despite the bank having additional costs from investment and simplification. Its cost-income ratio improved by 0.5 percentage points to 49.3%.

Lloyds made a statutory profit before tax of £1.6bn, down from 2014's £1.8bn, due to increased PPI charges.

The bank's basic and diluted earnings per share were both 0.8p. That was down from 2014's figures of 1.7p and 1.6p respectively.

'We made a strong start in 2015 to the next phase of our strategy and have delivered a robust financial performance, enabling increased dividend payments," said group chief executive António Horta-Osório.

"Our differentiated, UK focused, retail and commercial business model continues to deliver, with our financial strength, cost leadership and lower risk focus positioning us well in the face of current market uncertainty," he added.

The bank had PPI provision of £4bn during the year, including an additional £2.1bn in the fourth quarter, reflecting action on a proposed time-bar for claims.

"We remain confident in our ability to become the best bank for customers and shareholders, while continuing to support the economy and helping Britain prosper," Horta-Osório said.

The bank's board recommended a final ordinary dividend of 1.5p per share, making for a total ordinary dividend of 2.25p for the year. It also recommended a capital distribution in the form of a special dividend of 0.5p per share.

Lloyds also reported a strong balance sheet, with a pro forma common equity tier 1 (CET1) ratio of 13%, up from 12.8%, and 13.9% before the 2015 dividends. Its pro forma leverage ratio was broadly flat at 4.8%, compared with 2014's 4.9%.

Tangible net assets per share were 53.8p pre dividend and 52.3p post dividend, down from 54.9p on 31 December 2014. The bank said there had been significant improvement post year-end, however, and it was now estimated at 55.6p on 19 February.

The state's stake in Lloyds was reduced to 9% during the year. HM Government had taken a 43.4% holding in the group during the financial crisis in 2009.

Looking ahead, the bank's board was looking at an increase to its net interest margin to around 2.7% in 2016, with an asset quality ratio of around 20 basis points.

The bank would "continue to target return on equity of 13.5% to 15%, and around 45% cost-income ratio with reductions every year," the board said in a statement.

"Based on current interest rate assumptions, we now expect these to be delivered in 2018 and as we exit 2019, respectively," it added.

Lloyds' capital generation guidance had improved, and it now expected to generate around two percentage points of CET1 per annum, pre dividend.

Lloyds Banking Group reveals bonuses and remuneration

At the same time as its annual results, Lloyds revealed the bonuses it was releasing to its top employees for the year.

The bank said that, despite the better underlying financial results in 2015, the group's total bonus outcome has reduces year-on-year to £353.7m, from £369.5m in 2014.

That included a 26% collective performance adjustment applied to the group's total bonus outcome, reflecting additional conduct-related provisions relevant to the year which impacted negatively on profitability and shareholder returns.

It was previously announced that £30m was deducted to recognise the impact of failing to deliver the highest levels of customer service in PPI complaint handling.

As a percentage of pre-bonus underlying profit, the total bonus outcome had decreased top 4.2%, from 4.5% in 2014. Cash bonuses remained capped at £2,000, with additional amounts paid in shares and subject to deferral and performance adjustment.

"Our approach to reward is intended to provide a clear link between remuneration and delivery of the group's key strategic objectives, supporting the aim of becoming the best bank for customers, and through that, for shareholders. We believe in offering fair reward. We are embedding a performance-driven and meritocratic culture where colleagues are rewarded for behaviours aligned to the long term sustainable success of the business, our commitment to rebuilding trust and changing the culture of the group," siad Lloyds chairman Lord Blackwell in a statement.

"We want to ensure colleagues are empowered, inspired and incentivised to do the right thing for customers. Colleagues are rewarded in a way that recognises the very highest of expectations in respect of conduct and customer treatment, and when behaviour falls below acceptable standards, it is important that accountability is taken collectively as well as individually. This is particularly the case when dealing with, and learning from, mistakes of the past," he added.

Lloyds Banking Group 2015 bonuses:

• António Horta-Osório - chief executive - 723,977 shares
• Juan Colombás - executive director - 388,068 shares
• George Culmer - executive director - 393,534 shares
• Andrew Bester - group executive committee - 294,590 shares
• Karin Cook - group executive committee - 207,462 shares
• António Lorenzo - group executive committee - 510,097 shares
• Vim Maru - group executive committee - 309,093 shares
• David Oldfield - group executive committee - 269,556 shares
• Miguel-Ángel Rodríguez-Sola - group executive committee - 289,902 shares
• Matt Young - group executive committee - 380,170

Lloyds Banking Group deferred bonuses for 2012, 2013, 2014:

• Juan Colombás - 2012: 88,170 shares; 2013: 555,963 shares
• George Culmer - 2013: 591,068 shares
• Andrew Bester - 2012: 135,482 shares; 2013: 106,611 shares; 2014: 66,307 shares
• António Lorenzo - 2012: 75,269 shares; 2013: 94,069 shares; 2014: 57,329 shares
• Vim Maru - 2013: 47,855 shares; 2014: 57,024 shares
• David Oldfield - 2012: 47,374 shares; 2013: 39,709; 2014: 55,976 shares
• Miguel-Ángel Rodríguez-Sola - 2012: 61,112 shares; 2013: 72,343 shares; 2014: 55,976 shares
• Matt Young - 2012: 94,982 shares; 2013: 86,940 shares; 2014: 47.843 shares

Lloyds Banking Group 2016 Executive Director Base Salaries:

• António Horta-Osório - £1,125,000
• Juan Colombás - £738,684
• George Culmer - £749,088