Lloyds Raises Profit Targets After Strong Annual Results

Lloyds Banking Group has upgraded its key financial targets after reporting a stronger than expected rise in annual profits, signalling renewed confidence across Britain’s banking sector. The lender said profit before tax rose by 12% last year, exceeding market expectations and reflecting resilience despite a shifting interest rate environment. On the back of the performance, Lloyds raised its long term profitability goal and unveiled a substantial share buyback programme, underlining its commitment to returning capital to shareholders. The results position Lloyds as the first of the UK’s major banks to report annual earnings this year, setting an optimistic tone for the sector. Investors responded positively, with the bank’s shares edging higher in line with broader gains on the London stock market.

The bank said it now expects to generate a return on tangible equity of more than 16% in 2026, an upgrade from earlier guidance and a notable increase on prior forecasts. Management pointed to steady income growth, disciplined cost control and progress in strategic priorities as key drivers behind the improved outlook. Lloyds also announced plans for a multi billion pound share buyback during the current year, taking total capital returns to shareholders to nearly four billion pounds. The move reflects confidence in the bank’s balance sheet strength and future earnings capacity, even as borrowing conditions evolve and margins come under pressure across the industry.

Executives highlighted a supportive domestic backdrop as another factor underpinning the results. The current political environment has so far avoided additional taxes on banks, while regulators have been encouraged to streamline rules in an effort to support economic growth. Lloyds also confirmed it will shift to distributing excess capital on a half yearly basis, offering investors more regular returns. Analysts said the upgraded targets could prompt similar moves from rival lenders, with expectations that other major UK banks may follow suit when they report their own results in the coming weeks.

Looking ahead, Lloyds said technology will play a growing role in driving profitability, with a particular focus on artificial intelligence. The bank expects the wider use of AI across its operations to deliver significant additional profit benefits over the next two years through improved customer service and lower costs. While Lloyds acknowledged ongoing challenges, including costs linked to past motor finance issues, it said momentum across the business remained strong. The bank plans to provide further details on the next phase of its strategy later this year, as it looks to build on recent performance and sustain returns in a changing market environment.