Lloyds Banking Group shares are in the green this morning, albeit off their opening highs, as investors appear happy to ignore headwinds and focus on management’s plans to improve key areas of the business (namely tech), or maybe just the promise of greater shareholder returns.

Shares have stalled at 69p as the company announces a widely touted £1bn share buyback scheme, preferred by management over a special dividend in order to boost return on equity, however perhaps disappointing those investors that would have preferred a cash in hand payment. Full year pre-tax profits improved 24% to £5.2bn, helping to cover a 20% increase in FY dividend to 3.05p, both further positives, however missing consensus of £5.7bn after the group dedicated a further £600m in provisions to cover the mis-selling of PPI, greater than the £450m expected.

With the scandal now expected to cost the holder of the largest UK mortgage book upwards of £19bn (before factoring in any potential future provisions), it’s unsurprising that today’s strategy update also included plans to improve its mortgage lending business. How the bank navigates a more hawkish Bank of England in the coming months (58.5% chance of May hike), maintaining demand in the face of greater interest payments, will also be of key importance to shareholders moving forward.

Whether today’s strategy update will help to improve long term prospects and see a return to 2017’s 73.5p share price highs will be key, but at least in the short term, disguising a profits miss with an attractive offer for investors seeking immediate gratification has proved shrewd.

Henry Croft, Research Analyst, 21 February 2018