Bank of Scotland owner Lloyds targets £2bn of cost cuts as profits surge 23%: dividend hiked

The banking giant, which also owns Scottish Widows, outlined a new four-year strategy which will come into effect from 2027 when the previous five-year plan under boss Charlie Nunn comes to an end.

Lloyds’ pre-tax profit came in at £4.3 billion for the six months to the end of June, up 23 per cent on the same period last year, and higher than the £4.1bn that most City analysts had been expecting. This was driven by increased income and more controlled business costs, while customer lending and deposits increased over the period.

The group said it was on track to have found more than £2bn of gross cost savings between 2022 and 2026, and it was targeting a further £2bn by 2030. It hopes to achieve this by continuing a digital transformation and modernising the bank’s technology, and particularly from deploying artificial intelligence (AI) across its operations.

Since 2022, Nunn has overseen significant changes including transforming digital banking and ramping up the use of AI, building up the group’s wealth arm, and cutting hundreds of high street branches. More recently, Lloyds decided to scrap the historic Halifax brand and change it to Lloyds.

Nunn told investors: “We are successfully completing our 2022 to 2026 strategy, focusing on customer experience, pivoting the group to growth and laying the foundations for our exciting new strategy.

“We have strengthened our market leadership, built our digital and AI capabilities, and enhanced our cost and capital leadership, while remaining on track to deliver our 2026 financial targets. This ensures the group is well placed to launch our new strategy, Accelerate 2030, from a position of strength.”

The group also declared an interim ordinary dividend of 1.58p per share - equivalent to £918 million - up 30 per cent on the prior year.

Nick Sherrard, managing director of Edinburgh-based consultancy Label Sessions, said: “Lloyds has now delivered on a five-year plan that was all about fixing the machine. The challenge now is to move from fixing the machine to fixing the proposition.

“Lloyds has around 21.5 million customers using its apps and a product range that runs from current accounts to pensions. It has long had the raw materials to help someone manage all of their money.

“What it hasn’t done is assemble them into one experience. With the more recent acquisition of Curve, it can go further still and help customers manage money held with other providers.”

TUC general secretary Paul Nowak said: “This is further proof that we need to increase the bank surcharge.

“It’s plain common sense. While bank profits are booming, working people are struggling with mortgage misery and higher bills.

“Andy Burnham has hit the ground running on tackling the cost of living. But with no clear end in sight to the war in Iran, energy prices will rise further - and the government needs to keep going on support.”