Lloyds Banking Group shares are on the rise this morning after the bank more than doubled its annual pre-tax profit for 2016 to £4.24bn, boosted by a reduction in payment protection insurance (PPI) provisions.
The bank has seen its pre-tax profits for the year rise 158%, from £1.64bn in 2015 to £4.24bn last year, as PPI provisions fell dramatically, from £4bn to £1bn. According to the BBC, this is the highest annual statutory profit reported by the bank in a decade.
As a result, the bank's shares opened trading 4% higher at 69.49p.
However, its underlying profits fell from £8.1bn to £7.9bn in 2016, with slightly lower income and higher impairments, which was partly offset by lower costs.
The firm also saw its income edge lower, from £17.6bn in 2015 to £17.5bn last year, but has increased its dividend by 13% with plans to pay a special dividend.
Commenting on the economic backdrop in the UK, group chief executive Antonio Horta-Osorio said: "Given our UK focus, our performance is inextricably linked to the health of the UK economy which has been more resilient than the market expected post referendum, with GDP growth of 2 per cent in 2016.
"The UK's decision to leave the European Union means the exact nature of our relationship with Europe going forward remains unclear and the economic outlook is uncertain.
"However, the recovery in recent years with low unemployment, reduced levels of household and corporate indebtedness and increased house prices means the UK is well positioned."
The government recently reduced its stake in the bank to less than 6%, which has made BlackRock the largest shareholder in the lender for the first time.
However, last year Chancellor Philip Hammond scrapped plans for a sale of the bank's shares to retail investors in the aftermarth of the Brexit vote, amid fears of market volatility.
Michelle McGrade, CIO at TD Direct, said: "While there is currently a drag on Lloyds' share price with the government dripping the remainder of its holding into the market, this morning's results show too many investors have been viewing Lloyds' prospects through the rearview mirror.
"However, Lloyds promises to be a dividend cash cow in years to come and has demonstrated that it is committed to paying dividends. If interest rates rise and the mortgage market remains stable, this 'bottom draw' share should continue to be a lean, mean dividend-making machine for years to come, and investors stand to benefit from buying it for the long-term and reinvesting the dividends."
