The Lloyds Banking Group says its profit crashed by 72% in 2020 as the bank struggled with the Covid-19 pandemic in a low interest rate environment.

The bank, which is Britain’s biggest lender, posted pre-tax profit of £1.2bn (2019: £4.4bn) on a net income of £14.4bn.

This result, however, is better than analysts’ prediction: a profit of £905m on income of £14.2bn.

Like other banks, Lloyds was hit by provisions for credit losses. It set aside £4.2bn to cover expected bad loans. However, these charges were below the £4.5 to £5.5bn range forecast in July.

Britain’s top mortgage lender managed to reduce total costs by 4% to £8bn. Cost-income ratio stood at 55.3%. Loans and advances were broadly in line with prior year at £440.2bn.

Open mortgage book was up £7.2bn. This includes £10.2bn in the second half.

Customer deposits increased by £38.9bn in the year to £450.7bn. Retail current accounts were up 27%, having grown ahead of the market.

Group chief executive António Horta-Osório warned about incertitude ahead.

“Looking forward, significant uncertainties remain, specifically relating to the coronavirus pandemic and the speed and efficacy of the vaccination programme in the UK and around the world.”

Concluding the third strategic plan (2018-20)

2020 was the final year of our most recent strategic plan, launched in 2018. The aim was to help the bank transform for success in a digital world.

The overhaul would help Lloyds “to adapt quickly to the situation and to keep serving our customers throughout”.

The bank has leveraged its unique position as the UK’s only banking and insurance provider to increase its assets by £46bn.

Through the strategic plan, Lloyds has increased investment in technology.

It is now the largest digital bank in the UK with 17.4 million digitally active customers, up from 13.4 million in 2017.

Looking forward

2021 will be an important year of recovery for the UK, the CEO says.

He says Lloyds’ Strategic review 2021: Building the UK’s preferred financial partner focuses on recovery.

“It also continues our transformation as a Group, enhancing our capabilities and building our position as Britain’s preferred financial partner.”