Lloyds kicked off the latest installment of FTSE 100 banking earnings with Q4 and full-year results that exceeded expectations and underscored the bank’s ability to take economic concerns in its stride.
Underlying pre-tax profit for the fourth quarter came in at £1.9bn, 9% higher than expectations, and full year underlying profit rose to £6.8bn, 7% than the prior year.
“Lloyds is galloping ahead of expectations this morning, delivering a clear profit beat against consensus and upgrading its guidance through 2026,” said Max Harper, Analyst at Third Bridge.
“The bank’s income diversification strategy looks increasingly promising; specifically, the acquisition of the remaining stake in Schroders Personal Wealth presents a significant opportunity to boost revenue through strategic cross-selling.”
Underlying net interest income rose 6% to £13.6 billion, supported by an improved banking net interest margin of 3.06%, up 11 basis points year-on-year. Other income climbed 9% to £6.1 billion, reflecting stronger customer activity and the benefit of strategic initiatives, including a focus on wealth and retail banking.
Strategic initiatives contributed £1.4 billion in annualised additional revenues, putting the business on track to exceed its revised 2026 target of approximately £2 billion.
LLoyds net interest margin expanded to 3.10% in the fourth quarter, whilst average interest-earning banking assets increased to £462.9 billion. The increase in net interest margins is extremely encouraging, given the falling base rate.
“Lloyds is quietly proving itself one of the smartest operators in UK banking, with fourth‑quarter profits coming in 9% ahead of expectations,” explained Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“The market is still underestimating the resilience of its customer base, but the data tells a different story. Arrears remain low, early warning signs are calm, and impairments are once again impressively contained. It’s the sort of backdrop that shows a bank not just coping with stress, but gliding through it.
“Guidance for 2026 landed pretty much where the market expected, with Lloyd’s pencilling in a couple of rate cuts, low single‑digit house price gains and a touch of GDP growth. Together, guidance points to roughly £20.3 billion of top-line net income next year – a shade above consensus, and likely enough to nudge analyst numbers upward.”
Investors will be rewarded via a fresh £1.75bn buyback and 15% increase in the total dividend for the year.
Lloyds shares were fairly flat on Thursday, reflecting a strong run-up ahead of results.