Lloyds in recovery mode

A 47 per cent cut in the impairment charge, down to £3bn, provided the main boost. Lloyds’ cost performance looks reasonable, too - costs fell 5 per cent to £9.64bn and should fall to £9bn (excluding TSB-related costs) in 2014. TSB remains on track for flotation in mid-2014. Lower funding costs, meanwhile, helped bolster the net interest margin by 19 basis point to 2.12 per cent.

Such factors, along with disposal proceeds - most notably, Lloyds sold its St James’s Place stake - helped boost the Basel III core tier one capital ratio from the half-year's 9.6 per cent to 10.3 per cent. That's healthy for the sector and far better than RBS’s (RBS) expected 2013 ratio of 8.1-8.5 per cent.

Given such progress, it was all the more disappointing that Lloyds failed to return to the dividend list. Rather, regulatory permission will be sought to pay dividends in the second half, when Lloyds plans to distribute over 50 per cent of earnings. Prior to the financial crisis, the payout ratio was often significantly north of that.

As announced last month, an extra £1.8bn for PPI compensation was set aside in the fourth quarter, bringing the cumulative total to an eye-watering £9.8bn. But the worst here looks over and, with economic recovery underway, broker Investec Securities expects reported pre-tax profit to jump to £5.7bn for 2014, giving EPS of 5.9p, and net tangible assets (NTA) of 53.9p.