Lloyds Banking Group (LLOY.L) has announced a better-than-expected 12% rise in annual profit, alongside an upgraded key performance target and the launch of a £1.75 billion share buyback. This move signals growing confidence within Britain’s lending sector. Lloyds Banking Group is a British financial institution providing a range of banking and financial services. The company focuses on retail and commercial banking, as well as wealth management and insurance.
The bank reported a profit before tax for 2025 of £6.7 billion, up from £6 billion the previous year, surpassing the £6.4 billion average forecast by analysts. The bank has also raised its profitability target, now expecting a return on tangible equity greater than 16% in 2026, a significant increase from the previously forecast 12% for 2025. CEO Charlie Nunn attributed this upgrade to the company’s continued business momentum and strategic delivery.
These strong results from the first of the major British lenders to report annual earnings this year demonstrate the sector’s resilience, even amidst falling interest rates. Growth in fee income and a favourable political climate have contributed to this success. The Labour government has refrained from increasing taxes on banks, and has encouraged financial regulators to reduce bureaucracy in an effort to stimulate growth.
Lloyds shares rose 0.5%, mirroring gains in the FTSE index (.FTSE), although analysts noted that much of the bank’s strong performance was already factored into the share price. The increased profit target may also encourage rival lenders, including HSBC, Barclays and NatWest, to follow suit with similar upgrades. In addition to the buyback, bringing total capital returned to shareholders in 2025 to £3.9 billion, Lloyds will shift to half-yearly distribution of excess capital, rather than annually. Lloyds plans to update investors on the next phase of its strategy in July, likely with a greater focus on artificial intelligence to enhance customer service and reduce costs, targeting over £100 million in incremental profit benefit from generative AI in 2026.
