The chief executive of Lloyds Banking Group warned the lender had been on “heightened alert” for Russian cyber attacks as the crisis in Ukraine escalated.
“We’ve been focused on this now for the last couple of months,” said Charlie Nunn, as he announced an ambitious new strategy to fuel growth at the bank.
“I know that our colleagues and other companies in the UK have been focused on their cyber protection as well.”
Nunn, a first-time chief executive who joined from HSBC last August, unveiled a £4 billion (€4.8bn) investment plan over five years that Lloyds predicts will add revenues of £1.5 billion by 2026. The new approach is an attempt to shift the UK’s largest high street bank into a growth mindset, adding billions in revenue from businesses not dependent on interest rates, while digitising operations to cut costs and improve returns.
It represents a sharp break from the past and the approach of Nunn’s predecessor, António Horta-Osório, who spent most of his decade in charge slashing underperforming operations and repairing the financial and reputational damage from Lloyds’ £20 billion bailout during the financial crisis.
The plan was released alongside Lloyds’ annual results, which fell short of analysts’ expectations.
For the full year Lloyds reported pre-tax profit of £6.9 billion, 4 per cent below forecasts but sharply higher than the £1.2 billion it recorded a year earlier.
The fourth quarter was weighed down by £2.8 billion in costs, 25 per cent above analysts’ estimates. These included £600 million in charges relating to historical fraud at HBOS, which is owned by Lloyds, and contributed to an 8 per cent fall in the bank’s share price on Thursday morning.
Among the bank’s planned investments is £300 million to build a service for mass affluent customers with income or wealth above £75,000, who the group has targeted since 2011 without material market share gains.
Lloyds will also put £200 million into growing its investment bank’s cash, debt and risk management for corporate and institutional customers.
Digitising UK SME lending business is another target, with a £500 million investment.
Its results were also boosted by the release of £1.2 billion of provisions the lender had taken against bad loans, in line with projections.
Operating costs
In its new guidance for 2022, Lloyds set out a net interest margin above 260 basis points, operating costs of around £8.8 billion and a return on tangible equity of around 10 per cent, rising to more than 12 per cent by 2026.
Lloyds announced a dividend of 1.33p per share, bringing the total ordinary dividend for 2021 to 2p per share.
The bank also brought back bonuses, which it cancelled last year after missing its profit target. The £399 million pool is a significant increase on the previous pool of £310 million in 2019.
Nunn received £5.5 million for the period he worked in 2021, mainly due to a £4.2 million buyout of shares he held in HSBC. Excluding that he received £1.3 million.
Lloyds is not heavily exposed to Russia, but was working to implement sanctions policies, Nunn said.
The bank’s share price has risen more than 20 per cent over the past year as reopenings and rising inflation have prompted a shift from growth stocks to value stocks, including financials. – Copyright The Financial Times Limited 2022
