Lloyds Banking Group has raised its interim dividend by nearly a third and announced a fresh £1bn share buyback, after first-half profit rose on higher income and steady costs.
The results didn’t spark a huge rally in Lloyds shares on Thursday, likely due to a strong run going into the announcement, but shares were higher by 1.4% on the day.
The bank reported statutory pre-tax profit of £4.3bn for the six months to 30 June, up from £3.5bn a year earlier, with a return on tangible equity of 17.1%.
Underlying net interest income, the gap between what it earns on lending and pays out on deposits, rose 9% to £7.3bn, as its banking net interest margin widened by 15 basis points to 3.19%, helped by structural hedge income and franchise-led loan growth. Other income climbed 11% to £3.3bn, driven by stronger customer activity and strategic investments.
“This looks like another confident step forward from Lloyds,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“The headline income number was broadly as expected, but the quality underneath was better, with other income ahead, tight cost control and underlying profit before impairments beating forecasts.
“Net interest income kept moving higher as the structural hedge and loan growth continued to outweigh pressure on lending margins. Impairments were a little heavier than expected, though credit performance remains healthy, while a 30% dividend increase helped offset a slightly smaller-than-forecast buyback.”
Investors should be pleased with the uplift in the dividend, which reaffirms the stock as an income play at current priced after a positive rally reduced its yield. Lloyds lifted its interim dividend 30% to 1.58p a share, worth around £918m, and said it would launch a further buyback of up to £1bn, on top of the £1.75bn programme announced with its full-year results.
The bank reiterated its 2026 guidance, including a return on tangible equity above 16% and a cost-to-income ratio below 50%. It also set out longer-term targets under its new “Accelerate 2030” strategy, aiming for a return on tangible equity of around 20% by 2030.
Chief executive Charlie Nunn said the group had delivered sustained strength in performance, completing its 2022 to 2026 strategy from a position of strength and preparing to launch its next phase of growth.
A solid set of results shareholders should be happy with.