Lloyds shares rally after profit boost and £1.8bn buyback
Shares in Lloyds Banking Group jumped on Thursday as the bank launched a £1.8bn share buyback after breezing past profit expectations in the 2025 financial year.
The FTSE 100 banking giant recorded a 12 per cent jump to pre-tax profit in the full-year netting £6.7bn and easily surpassing the £6.4bn pencilled in by internal analysts.
This came as income remained resilient despite the acceleration of interest cuts after the Bank of England shaved one per cent off the rate in the last year. The bank’s stock was up one per cent by Thursday afternoon to 105.55p.
Net interest income hit £13.6bn, up six per cent compared with 2024 where rates were at a post-financial crisis high of 5.25 per cent. This supported a seven per cent growth in overall income to £18.3bn. The bank did undershoot expectations for its net interest income forecast for 2026, expecting to hit £14.9bn – £100m below consensus.
Lloyds is set to dish the cash back to shareholders with a fresh £1.75bn buyback, which follows near £3.9bn in returns for the 2025 financial year.
The group’s ordinary dividend hit 3.65p per share, up 15 per cent year-on-year.
“From our perspective, today couldn’t have gone much better,” Jefferies analyst Jonathan Pierce said.
The analysts said the distributions took centre stage with the bank still poised to move to a half-yearly buyback.
Lloyds flags global woes with impairment charge
Costs edged up slightly in the year, rising three per cent to just shy of £10bn. The bank said this reflected “strategic investment,” which included severance expense.
The bank has taken the chop to operations in the last year in a bid to streamline costs. Morning Wire revealed last February some 6,000 tech and engineering jobs at the bank had been placed under review as the firm looked to modernise its digital offer.
In September, the Financial Times reported Lloyds was reviewing its approach to performance management with the bottom 3,000 of the firm’s 63,000 employees at risk of losing their role.
The banking giant said increased impairment charges partially offset profit after rising 84 per cent to £795m.
It added the charge included an extra £74m which reflected the “updated macro economic outlook,” and accounted for the latest escalation in Trump’s tariff war and geopolitical tensions.
But Lloyds managed to keep a lid on major expenses, despite a hefty extra provision from the motor finance scandal causing third quarter profits to slide 36 per cent.
The lender is currently on the hook for nearly £2bn as it braces for more details on the Financial Conduct Authority’s industry-wide redress scheme expected early 2026.
Charlie Nunn, the bank’s chief executive, 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 bank now expects 2026 return on tangible equity – a key metric indicating profitability – to be greater than 16 per cent, from its previous estimate of greater than 15 per cent and well above the 12.9 per cent achieved in 2025.
Richard Hunter, head of markets at Interactive Investor, said: “Lloyds continues to display the kind of strong and dependable performance which has increasingly attracted global investors not only to the bank and the sector, but the primary index as a whole.”