Lloyds profit rises 23% as dividend jumps 30% and £1 billion buyback lands

Lloyds Banking Group has delivered a strong first half, combining higher income with controlled operating costs and growing customer lending.

The headline numbers are encouraging. Statutory profit before tax increased by 23% to £4.3 billion, while return on tangible equity rose to 17.1%. That performance has supported a 30% increase in the interim dividend and a further share buyback of up to £1.0 billion.

The bank also reiterated its 2026 guidance and unveiled Accelerate 2030, its new strategy targeting higher returns, further income growth and a lower cost base.

Investors can read the original company announcement for the full set of accounts.

Lloyds half-year results at a glance

Key measure	First half 2026	First half 2025	Change
Statutory profit before tax	£4.3 billion	£3.5 billion	23%
Statutory profit after tax	£3.1 billion	£2.5 billion	23%
Underlying profit	£4.2 billion	£3.6 billion	18%
Net income	£9.7 billion	£8.9 billion	9%
Underlying net interest income	£7.3 billion	£6.7 billion	9%
Underlying other income	£3.3 billion	£3.0 billion	11%
Operating costs	£4.9 billion	£4.9 billion	Flat
Return on tangible equity	17.1%	14.1%	3.0 percentage points
Interim dividend per share	1.58p	1.22p	30%

Earnings per share increased from 3.8p to 4.8p, helped by higher profit and a 3% reduction in the weighted average number of shares in issue.

Stronger interest income remains the main engine

Underlying net interest income rose by 9% to £7.3 billion. This is the income Lloyds earns from the difference between interest received on assets such as mortgages and loans and interest paid on funding such as deposits.

The banking net interest margin, which measures this spread as a percentage of interest-earning assets, improved from 3.04% to 3.19%. It strengthened further to 3.22% in the second quarter.

Lloyds attributed the improvement to higher structural hedge income, franchise-led lending growth and a 4% increase in average interest-earning banking assets to £475.7 billion. A structural hedge is used to reduce the effect of changing interest rates on stable customer balances.

Structural hedge income reached £3.4 billion during the half, up from £2.6 billion. Lloyds expects it to exceed £7.0 billion in 2026 and £8.0 billion in 2027.

There was still some pressure from narrower asset margins, particularly in UK mortgages. Deposit pricing also created a headwind during the second quarter. These pressures did not prevent the overall margin from improving, but they remain relevant when assessing how sustainable the current income momentum may be.

Other income grows while costs stay controlled

Underlying other income increased by 11% to £3.3 billion, reflecting stronger customer activity and the benefit of previous strategic investment.

Growth included higher income from UK Motor Finance, Insurance, Pensions and Investments, Lloyds Living and the LDC private equity business. The full acquisition of Schroders Personal Wealth, now Lloyds Wealth, also contributed.

Operating costs were effectively flat at £4.9 billion. Cost savings, lower severance expenses and plateauing investment offset inflation, business growth costs and the addition of Lloyds Wealth.

This helped reduce the cost:income ratio from 55.1% to 50.4%. The ratio measures how much a bank spends to generate each pound of income, so a lower figure is generally preferable.

One weak spot was operating lease depreciation, which increased by 18% to £841 million. Lloyds recorded an additional £41 million second-quarter charge after further declines in used car prices affected expected vehicle residual values. Management expects the charge to return to a more normalised run-rate in line with fleet growth.

Credit performance is stable, although impairments increased

The underlying impairment charge rose from £442 million to £617 million, producing an asset quality ratio of 25 basis points. One basis point is one-hundredth of a percentage point.

This included an £80 million net charge following updates to Lloyds' economic scenarios, compared with a £9 million credit in the previous year. The assumptions reflected a higher peak in unemployment and a softer outlook for house prices.

Despite the higher charge, Lloyds described credit performance as strong and stable, with arrears remaining low and stable across Retail and Commercial Banking.

The bank recognised just £39 million of remediation charges and recorded no additional charge for motor finance commission arrangements. However, challenges to the Financial Conduct Authority's redress schemes have delayed implementation, with an Upper Tribunal hearing not expected before December 2026. Lloyds said its existing provision remains its current best estimate, but uncertainty has not disappeared.

Lending growth supports the balance sheet

Underlying loans and advances increased by £10.4 billion during the half to £491.5 billion. Retail lending grew by £5.0 billion, while Commercial Banking added £5.9 billion.

Customer deposits increased by £4.4 billion to £500.9 billion. Commercial Banking deposits rose by £7.5 billion, partly offset by a £3.4 billion reduction in Retail deposits following disciplined pricing decisions.

The loan-to-deposit ratio was 98%, while the liquidity coverage ratio stood at 144%. Together, these figures point to a robust funding and liquidity position.

Tangible net assets per share were unchanged from December 2025 at 57.0p.

Capital generation funds higher shareholder returns

Lloyds generated 108 basis points of capital during the first half. Its pro forma common equity tier 1, or CET1, ratio was 13.1% after accounting for dividends, the new buyback and the Curve acquisition. CET1 is a key measure of a bank's highest-quality regulatory capital.

The interim dividend rises by 30% to 1.58p per share, equivalent to £918 million. Lloyds has also announced a further share buyback of up to £1.0 billion, in addition to the £1.75 billion programme announced with its 2025 full-year results.

Buybacks reduce the number of shares in circulation and can increase each remaining shareholder's claim on future earnings, although the outcome depends on the price paid and future business performance.

The latest distribution continues the progress reported in Lloyds' 2025 half-year results. Further company coverage is available on the Lloyds Banking Group share page.

Accelerate 2030 raises the longer-term ambition

The new Accelerate 2030 strategy focuses on growing core businesses, developing connected propositions across the group and simplifying operations through technology and artificial intelligence.

Lloyds is targeting around £2 billion of gross cost savings by 2030. It expects mid-single-digit net income compound annual growth and high-single-digit growth in underlying other operating income from 2027 to 2030.

The bank is also targeting a cost:income ratio below 45% in 2030, return on tangible equity of around 20% and capital generation above 225 basis points.

These are meaningful ambitions. Delivering them will require Lloyds to fund growth and technology investment while managing credit risk, regulatory uncertainty and pressure on lending margins.

What investors should watch next

Lloyds reiterated all its 2026 guidance, including underlying net interest income above £14.9 billion, a cost:income ratio below 50%, return on tangible equity above 16% and capital generation above 200 basis points.

The first-half performance leaves the group on track against those targets. Income is rising, costs are controlled and capital generation is supporting larger distributions.

The main areas to monitor are the higher impairment charge, used car price pressure, mortgage margin compression and the unresolved motor finance redress process. Investors will also need evidence that Accelerate 2030 can deliver its promised growth and cost savings without weakening Lloyds' risk discipline.

For now, the strongest feature of these results is the combination of improving profitability and increased cash returns to shareholders, rather than either element in isolation.