Lloyds Bank unveils ambitious growth plan after profits jump

Lloyds Banking Group on Wednesday set out an ambitious growth plan, handing £3.2 billion to shareholders and unveiling a scheme to digitise the group.

The City lapped up a £1 billion share buyback and predicted there were more goodies to come.

Chief executive Antonio Horta-Osorio will spend £3 billion on a digital transformation scheme that he claims will “create the bank of the future”.

Staff will be retrained and some will lose their jobs. The branch network of 1800 will inevitably shrink, but Lloyds said it was too early to say how many jobs or branches will go.

Horta-Osorio says he is committed to keeping the biggest branch network in the UK, but said: “The skills our colleagues will require in the future will be different.”

Under his rule, 30,000 jobs and a third of branches have already gone.

Though the dividend is flat at 3.05p, or £2.2 billion in all, that still means a nice cheque for Lloyds’ 2.4 million small shareholders.

Less than a year after the Government sold its final stake in the bank — following a £20 billion bail-out in 2008 — Lloyds is now returning cash apace.

Ian Gordon at Investec Securities described the results as “distribution time… and this is just the start.” He thinks the shares are worth 76p. Today they were up a penny at 69p.

Horta-Osorio hailed a “landmark year” that saw profits rise 24% to £5.3 billion. That was a bit less than the City expected because of another £600 million bill for PPI claims.

Lloyds is already the UK’s biggest internet bank but believes it has to invest heavily to do battle with new entrants. Amazon, Apple and other tech giants are all predicted to move into traditional banking territory in the coming years.

Horta-Osorio, now seen as committed to staying with Lloyds after failing to land the top job at HSBC, is reasonably upbeat about the prospects for the economy. “My best prediction is that this year will be the same as last year,” he said.

Rising interest rates ought to be good for bank profits, so long as borrowers can keep servicing debts.

Lloyds plans to expand rapidly in corporate pensions and retirement planning, aiming to have £50 billion in assets by 2020.