Lloyds resumes dividends

Underlying profits, which strip out costs relating to the TSB demerger (£1.5bn) and the payments protection insurance scandal (£2.2bn), increased 26 per cent to £7.8bn. Impairment charges were down 60 per cent to £1.2bn, and costs fell 2 per cent to £9.4bn. Strip out the TSB cost base and the latter figure would have been even lower, at £9bn. The bank has also moved to reduce its reliance on wholesale funding, reducing its loan-to-deposit ratio from 154 per cent in 2010 to 107 per cent last year.

Significantly, these helped boost the bank's Basel III core tier one capital ratio - the central regulatory target - from 10.3 per cent to 12.3 per cent. The bank has also indicated its growing confidence in a number of key operating targets. Tier one capital is expected to rise by 1.5-2 percentage points this year, while the cost-to-income ratio is set to fall to around 45 per cent by 2017, with reductions each year from the 51 per cent recorded in 2014. The bank also expects last year's net interest margin of 2.45 per cent (the spread between the rates it receives from borrowers and those it pays depositors and creditors) to improve to around 2.55 per cent in 2015.

In commercial banking, management was quick to pre-empt political criticism with news that loans to small and medium-sized enterprises rose by 5 per cent, marking the fourth consecutive annual increase in a market where lending has continued to decline. On the retail side, gross mortgage lending rose 13 per cent to £40bn.

Subject to revision, analysts at Investec are forecasting pre-tax profits this year of £6.25bn, giving EPS of 6.3p, with year-end net tangible assets (NTA) of 57p per share.