Lloyds Profits Fall To £1.6bn On PPI Charge

Lloyds Banking Group (Other OTC: LLOBF - news) has reported a 7% fall in annual profits - blaming £2.1bn of additional charges it has set aside to cover the payment protection insurance (PPI) scandal.

The bank - still part-owned by the taxpayer after its final share sale was suspended by the Government - said pre-tax profits for 2015 came in at £1.6bn - down from almost £1.8bn the previous year.

The bank said it saw a "robust financial performance" but its bottom line was hurt by a total provision for mis-selling PPI during the year of £4bn.

It (Other OTC: ITGL - news) means Lloyds has made PPI provisions of £16bn to date but the bank said it hoped that booking the latest £2.1bn charge in the fourth quarter would draw a line under the issue - the most costly legacy action in UK banking history.

The bank said it also set aside £837m to cover costs on other conduct issues, including packaged bank accounts.

Other notable announcements by the bank included a bonus pool of £353m - a slight reduction on last year to reflect regulatory action over mis-selling.

It also confirmed a bonus of £850,000 for Antonio Horta-Osorio - the bank's chief executive - meaning he was awarded a total package of £8.7m for the year.

Underlying profits, which better reflect its day-to-day business, rose 5% to £8.1bn and Lloyds said its board was recommending a final ordinary dividend of 1.5p-per-share taking the total for the year to 2.25p.

A special dividend of 0.5p-per-share was also agreed.

Mr Horta-Osorio said: "We made a strong start in 2015 to the next phase of our strategy and have delivered a robust financial performance, enabling increased dividend payments.

"Our differentiated, UK focused, retail and commercial business model continues to deliver, with our financial strength, cost leadership and lower risk focus positioning us well in the face of current market uncertainty."

The Government blamed volatility in world markets last month for its decision to suspend the sale of the taxpayer's final 9% stake in Lloyds.

Its share price rose 9% in early trading on Thursday.