LLOYDS BANKING GROUP RETURNS TO PROFIT AND RESUMES DIVIDEND PAYMENTS

A branch of Lloyds Bank in London.

LONDON — The Lloyds Banking Group said on Friday that it returned to a profit in 2014 as it prepared to pay its first dividend since the lender was bailed out by the British government during the financial crisis.

The return to paying a dividend, while mostly symbolic, is an important milestone for the bank, which received 17 billion pounds, or about $26 billion, from the British government in 2008.

Lloyds said that it would pay a dividend of 0.75 pence a share, returning about £535 million to investors. The last full-year dividend it paid was 35.9 pence a share for the 2007 fiscal year.

The revival of the shareholder payout comes as the British government continues to reduce its stake in the bank after having held as much as 40 percent. After a sale announced on Monday, the British government now has a 23.9 percent stake in the bank.

“While we recognize we have more to do, we enter the next phase of our strategy from a position of strength,” António Horta-Osório, the Lloyds chief executive, said in a news release. “We will remain focused on our customers, embrace the digital age throughout the whole group, continue our support for the U.K. economy and aim to deliver strong and sustainable returns for our shareholders.”

Going forward, the bank said it intended to pay out at least 50 percent of its sustainable earnings in the medium term and expected to pay a dividend for the 2015 fiscal year.

Since joining the lender from Banco Santander in 2011, Mr. Horta-Osório has aggressively reduced costs, shrunk the bank’s ambitions outside Britain and sold off a variety of businesses.

Mr. Horta-Osório’s total compensation for 2014 was £10.8 million, including the vesting of more than £7 million in shares from a long-term incentive program. On a conference call with journalists, Mr. Horta-Osório said he would hold on to those shares “until the government’s stake is significantly reduced.”

News that Lloyds will resume paying dividend comes at the end of what has been a difficult week for British banking leaders.

HSBC reported a 15 percent drop in annual profit on Monday, and its leaders were forced to apologize again as they faced tough questioning from a parliamentary committee over the prior activities of its Swiss private banking unit, which included helping clients evade taxes as recently as 2007.

On Thursday, the Royal Bank of Scotland reported its seventh-straight annual loss and said it would dismantle its global investment bank, potentially affecting thousands of jobs.

And Standard Chartered said it was shaking up its leadership, including replacing its longtime chief executive, Peter Sands, with the American banker William T. Winters. The bank, which reports its annual results next week, has faced pressure from shareholders amid a slowing of its core business in Asia and increased regulatory scrutiny.

At Lloyds, for the year ended Dec. 31, the bank posted a profit of £1.49 billion pounds, compared with a loss of £802 million in 2013.

The bank said underlying profit, which excludes asset sales and some costs, rose 26 percent to £7.76 billion in 2014, from £6.17 billion in the prior year. The result exceeded analysts’ expectations, according to Reuters.

Lloyds posted a pretax statutory profit of £1.76 billion, an important measure for the bank.

Net interest income, the measure of what a bank earns on its lending after deducting what it pays out on deposits and other liabilities, rose 8 percent to £11.8 billion for the year, from £10.9 billion in 2013.

But, like many of its peers, it continued to deal with legacy issues related to prior conduct by its employees.

The bank said it had set aside another £700 million in the fourth quarter for potential compensation of customers who were improperly sold payment protection insurance, a product that has cost British banks billions of pounds to make restitution. For the year, the bank set aside £2.2 million for payment protection insurance claims.

The pace of new payment protection insurance complaints was down 22 percent from 2013, but Lloyds said it was expecting the volume of complaints to decline at a slower rate than it previously forecast.

Lloyds said it also set aside another £925 million for other regulatory matters during the year, including £217 million in July to resolve investigations by British and United States authorities into the manipulation of benchmark interest rates, including the London interbank offered rate, or Libor.

For 2014, the bank said that it would give discretionary annual bonus awards of £369.5 million, down 3.6 percent from 2013 after adjusting for the spinoff of TSB.

The bank’s core Tier 1 capital ratio, a measure of its ability to weather financial disturbances, rose to 12.8 percent at the end of December from 10.3 percent at the end of 2013.

European banks are required to have a minimum of 4 percent common equity Tier 1 capital under European rules, but larger banks are required to maintain a higher minimum capital level, which is set by their local regulators.

The New York Times