Wednesday 21 February 2018 2:28 pm

Lloyds share price rises after profits increase: Here’s how the analysts reacted

Lloyds Banking Group today bombarded investors with a rise in profits which nevertheless missed estimates, a £1bn share buyback, and a £3bn investment programme as it unveiled its new three-year strategy.

Shares rose by two per cent at the time of writing.

Here's what the analysts made of Lloyds' performance in 2017.

Results in line

Gary Greenwood, an analyst at Shore Capital, said the results were "broadly in line with expectations on an adjusted basis, but a little weak on a statutory basis due to addition conduct redress charges" from missold payment protection insurance (PPI) claims.

However, he warns that "the strategy update implies a sharp improvement in statutory profitability is anticipated, with continued strong capital generation (which should support further significant capital returns) and with impairment ratios that are more optimistic than consensus is expecting."

Reassurance for investors

Jason Napier, head of European banks research at UBS, said the strategy update will provide a balm for investor nerves.

"Plans to grow revenues at stable margins, cut costs and generate surplus capital should reassure investor concerns, we think," with potential profit upgrades and a "steady stream of buybacks" expected down the line.

Pensions land grab

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "There’s a lot to like in Lloyds’ numbers, with profits rising, costs under control, and prodigious amounts of cash being thrown off to shareholders."

Lloyds's target of one million new pension customers by 2020 means it will have to take market share from competitors, Khalaf adds.

"One would expect Scottish Widows to play a pivotal role in this pensions land grab, which lends some context to the recently announced prospective withdrawal of £109bn of assets from Standard Life Aberdeen," he said.

Robust results

Whilst full-year underlying profit before tax missed by one per cent, Joseph Dickerson and Kapilan Pillai, analysts at Jefferies, said "the results looked robust to us and consistent with our "'buy" thesis".

The bank's strategy review guidance of a 14 to 15 per cent return on tangible equity in 2019 suggests Lloyds has "materially re-assessed the earnings power" of the firm, they added.