(Correcting sum of Lloyds Banking Group PLC's final dividend.)

(Alliance News) - Lloyds Banking Group PLC on Thursday reported an annual profit surge and announced a new share buyback, though it said it has booked a provision in connection to a UK watchdog probe on historic motor finance arrangements.

The lender said net income grew 2.7% to GBP17.93 billion from GBP17.47 billion. Included in that top-line rise was a 4.5% increase in underlying net interest income to GBP13.77 billion.

Lloyds said pretax profit surged 57% to GBP7.50 billion from GBP4.78 billion.

It lifted its final dividend by 15% to 1.84 pence per share from 1.60p. It took the total dividend for the year to 2.76p, a rise of 15% from 2.40p. In addition, it announced a GBP2.0 billion buyback.

"In combination, this is a total capital return of up to GBP3.8 billion, or 14% of the group's market capitalisation," it said on its dividend and new buyback.

Chief Executive Charlie Nunn added: "2023 was a critical year in building towards the ambitious strategy we announced two years ago, as we look to grow our business and deepen relationships with our customers. As demonstrated in our recent strategic seminars, we have made significant progress and are on track to meet our 2024 and 2026 strategic outcomes, helping us build towards higher and more sustainable returns."

Looking to 2024, it expects to achieve a banking net interest margin of "greater than 290 basis points". In 2023, it rose 17 basis points to 3.11% from 2.94%.

Further out, it maintained its 2026 guidance of a cost to income ratio of less than 50%, and a return on tangible equity of greater than 15%. It expects a 2024 RoTE of around 13%, which would be off the 15.8% achieved last year. Its RoTE in 2022 came in at 9.8%.

Lloyds reported remediation costs of GBP675 million for 2023, up from GBP255 million a year prior. The latest figure includes a GBP450 million provision following a Financial Conduct Authority review into historical motor finance commission arrangements, Lloyds said.

"There remains significant uncertainty as to the extent of any misconduct and customer loss, if any, the nature of any remediation action, if required, and its timing. Hence, the impact could materially differ from the provision, both higher or lower," it cautioned.

The UK financial services watchdog in January had said it is probing whether compensation could be due for people who were potentially overcharged for car loans.

If it finds misconduct, those affected will be compensated. The FCA said it heard from over 10,000 people who are concerned they were charged too much. It added there could be even more yet to come forward.

Also on Thursday, Lloyds said Alan Dickinson will step down as deputy chair at the firm's annual general meeting this year.

In addition, it said Nathan Bostock has been named a non-executive director and will chair its Lloyds Bank Corporate Markets arm from August 1. Bostock was chief executive of Santander UK between 2014 and 2022 and was formerly finance chief of Royal Bank of Scotland PLC, now named NatWest Group PLC.

Lloyds shares traded 0.3% lower at 43.18 pence each in London on Thursday morning.

By Eric Cunha, Alliance News news editor

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