Lloyds Bank has increased its dividend by 15% to 1.06 pence per share, after the banking firm saw its profits fall year-on-year in the first half of its current financial year.

Profit before tax at the banking group, which includes Halifax and Bank of Scotland, reached £3.3bn in the half year to 30 June, a 14% drop year-on-year, as a result of operating costs increasing by 7%, which included the Bank of England levy.

In this time, Lloyds said that it was able to continue strategic transformation, which sees £3bn of planned investment between 2022 and the end of 2024.

Loans and advances to customers increased by £2.7bn during this period to £452.4bn, with growth across its retail sector, including mortgages and unsecured loans.

Group chief executive at Lloyds Bank, Charlie Nunn, said: "In the first six months of 2024, the group delivered robust financial results with solid income performance and cost discipline alongside strong capital generation.

"2024 is a key year for our strategic delivery. We continue to deliver on our strategic transformation, as illustrated in the fourth of our investor seminars last month. We remain on track to meet our 2024 targeted outcomes. Indeed, our progress to date enables us to reaffirm 2024 guidance and remain confident in achieving our 2026 strategic objectives and guidance.

Guided by our purpose, we continue to support customers in reaching their financial goals and successfully transform our group. This underpins our ambition of higher, more sustainable returns that will deliver for all of our stakeholders as we continue to help Britain prosper."

Looking ahead, Lloyds Bank has said that on its current macroeconomic assumptions, it expects operating costs to reach £9.4bn, with a banking net interest margin of greater than 290 basis points.

It also added that its medium term guidance has set out plans for a cost income ratio or less than 50%, with a return on tangible equity of greater than 15%.

Head of markets at interactive investor, Richard Hunter, added: "A post-tax profit for the half-year of £2.4bn compares less favourably due to the difficulties posed in the first quarter. The number is down from £2.9bn the year previous, with some pressure on net interest income, which fell by 10% to £6.3bn, being exacerbated by a rise of 7% in operating costs, although for the latter some of the increase was due to planned strategic investment.

"Indeed, there are certainly some signs that the backdrop could be improving. Interest rate reductions are still expected this year, which could shift some further customer lending activity towards higher margin mortgage products. At the same time, there has been no discernible increase in customer defaults, with the group’s asset quality remaining strong, which will come as something of a relief to investors.

"In all, the results are steady rather than spectacular, even though there is the promise of brighter times ahead. The cool reaction to the update in opening trade comes against a weaker wider market, but does little to undermine a recent performance which has seen the share price rise by 30% over the last year, as compared to a gain of 6% for the wider FTSE100, including a particularly strong six-month run of late which propelled the price 42% higher. Indeed, as a as a longer-term play based on shareholder returns, improving prospects and a historically undemanding valuation, the market consensus of the shares as a buy is likely to remain intact."

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