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Lloyds looks past misselling era with fresh growth forecast

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Lloyds Banking Group gave a bullish outlook as the effects of a long-running insurance scandal and the uncertainties of Brexit begin to fade.

[LONDON] Lloyds Banking Group gave a bullish outlook as the effects of a long-running insurance scandal and the uncertainties of Brexit begin to fade.

Britain's biggest mortgage lender is targeting returns of 12 per cent to 13 per cent for this year, up from 7.8 per cent in the past year after a charge for compensating customers who were missold payment protection insurance.

"Although uncertainty remains given the ongoing negotiation of international trade agreements, there is now a clearer sense of direction and some signs of an improving outlook," said Chief Executive Officer Antonio Horta-Osorio.

Lloyds shares rose as much as 4.2 per cent to 58.1 pence in early London trading.

Its upbeat view comes a week after Royal Bank of Scotland Group softened its outlook for a key measure of profitability, blaming an uncertain economy. Lloyds Chief Financial Officer William Chalmers said cost discipline would help deliver the target.

Lloyds missed analyst forecasts in the fourth quarter with a pretax profit of £1.4 billion (S$2.5 billion), against a consensus of £1.5 billion.

Nine years into his tenure, Mr Horta-Osorio, 56, has steered Lloyds to profitability and full private ownership. Still, the bank still depends heavily on the strength of its home economy, which is clouded by last month's departure from the European Union.

Lloyds didn't resume its £1.75 billion share buyback programme, having suspended it in September after a last-minute rush of claims for missold insurance. However, it raised its dividend by 5 per cent to 3.37 pence.

The board will start working on a new three-year plan in June, Mr Horta-Osorio said on a call with journalists. "I am absolutely committed to the execution of the strategy and nothing has changed," he said, replying to a question about his future. "I enjoy the job, I like the people here, there is a lot still to do."

The lender cut Mr Horta-Osorio's pay by 28 per cent to £4.73 million for last year, and is proposing to reduce the CEO's maximum pay to £7 million in future. The Portuguese boss was one of the most highly paid bank chiefs in London in 2018 - but last year, his new CFO Chalmers out-earned him, thanks to a large buyout payment.

"That's absolutely fine with me," Mr Horta-Osorio said of the board's plans. "It's an independent decision."

BLOOMBERG