Lloyds Banking Group said today that its annual profit rose 12%, beating expectations, and it raised its performance forecast as increased income offset nearly £1 billion in charges for compensating customers mis-sold motor finance.
The UK bank reported profit before tax for 2025 of £6.7 billion, up from £5.97 billion s the year before and better than the 6.4 billion pounds average of analysts' forecasts.
The bank also lifted its profitability target, saying it now expects to make a return on tangible equity greater than 16% in 2026, having forecast just 12% for 2025.
"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," CEO Charlie Nunn said.
The bank said it would also buy back €1.75 billion of its own shares, bringing total capital returned to shareholders in 2025 to €3.9 billion.
Lloyds will update investors on the next phase of its strategy in July, Nunn added.
Britain's biggest mortgage lender had already flagged earlier this year that the cost of dealing with the motor finance scandal, in which customers were sometimes not told about hidden commissions, would drag down its overall results for 2025.
The stronger-than-expected numbers from the first of the big British lenders to report annual earnings this year shows how the sector has nonetheless thrived even as interest rates have fallen back, thanks to growth in fee income and a more favourable political climate.
