By Elena Vardon

Lloyds Banking Group continues to expect loan volumes, its structural hedge and fee-generating activities to support income growth this year, and raised its profitability guidance.

The U.K.'s largest mortgage provider on Thursday guided for around 14.9 billion pounds ($20.57 billion) in net interest income--the difference between what banks earn on loans and pay out on deposits--for 2026, after reporting a 6% increase to 13.635 billion pounds for 2025.

The bank also raised its view for return on tangible equity--a key profitability metric--for the coming year and now expects a return greater than 16%, compared with a previous forecast of more than 15%, as it intends to keep operating costs under 9.9 billion pounds. For 2025, it reported a return of 12.9%, or 14.8% excluding a car-loan probe-related charge.

"The sustained strength in performance means we are well positioned for 2026 and beyond," Chief Executive Charlie Nunn said.

For 2025, it reported a 12% rise in pretax profit to 6.67 billion pounds, ahead of a 6.38 billion-pound estimate taken from a company-compiled consensus. This is despite a heavy top-up to its provisions in the third quarter to cover its exposure to a probe into commissions paid on car loans, which is set to result in an industry-wide redress program to compensate customers. Lloyds is the largest car-finance provider in the country through its Black Horse brand.

Top-line growth was supported by its push to diversify income streams as well as its structural hedge--a mechanism that mitigates the impact of interest-rate moves by the Bank of England, allowing it to keep lending margins resilient while weathering an environment of falling rates. Income from activities other than its core banking products, such as wealth management and insurance, grew 9% to 6.12 billion pounds last year and represents around a-third of total income.

Lloyds also said it would launch a 1.75 billion-pound buyback and review excess capital distributions on a half-yearly basis moving forward. The board declared a final dividend of 2.43 pence a share, bringing its total payout for the year 15% higher at 3.65 pence.

The bank said it will outline a new strategy in July as its current five-year plan, which dates from 2022, comes to an end.

Shares in London were little changed in morning trade, as the guided figures roughly aligned with market expectations.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

January 29, 2026 04:44 ET (09:44 GMT)

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