Lloyds Banking Group delivered a strong set of half-year results, combining higher profits, a substantial increase in shareholder returns, and a new long-term growth strategy based on AI and digital transformation.

For the first half of 2026, total income increased 13% to £10.6bn, while pre-tax profit jumped by 23% to £4.3bn, after the £2.27bn reported for Q2 beat expectations of £2.1bn.

Underlying net interest income rose 9% to £7.3bn as the banking net interest margin improved to 3.19% from 3.04% a year earlier. Underlying other income climbed 11% to £3.3bn, reflecting stronger customer activity and continued benefits from strategic investments.

Lending and deposits both continued to grow, with loans and advances increasing 2% to £491.5bn and customer deposits rising 1% to £500.9bn, supported by commercial banking growth. Mortgage balances also increased, boosting Lloyds' position as the UK's largest mortgage lender.

Operating costs were broadly unchanged at £4.9bn, despite inflationary pressures and the acquisition of Schroders Personal Wealth. Return on tangible equity improved to 17.1%.

The bank increased its interim dividend by 30% to 1.58 pence a share and announced a further £1bn share buyback.

It also launched its new 'Accelerate 2030' strategy, targeting a return on tangible equity of around 20% by 2030 through greater use of AI, stronger integration across the group and productivity improvements expected to deliver a further £2bn of cost savings. The strategy aims to drive income growth, improve efficiency, reimagine customer journeys and increase returns to shareholders through the end of the decade.

Lloyds said generative AI alone is expected to generate around £100m of benefits in its UK retail business this year.

CEO Charlie Nunn said: "We delivered sustained strength in financial performance. 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. Our strategy will allow us to unlock the next phase of growth and sustainable value creation for our shareholders."

Shares traded up around 3% during today's session on the back of the results and strategy announcement.

Richard Hunter, head of markets at interactive investor, said the results showed Lloyds' improving earnings mix, with insurance, credit cards and private banking expected to become increasingly important growth drivers, reducing the group's reliance on traditional lending over time.

Hunter said: “The update is strong and dependable rather than shooting out the lights and given that Lloyds is often seen as a barometer for the UK economy, its progress has been hard-won. Alongside the prudent provisions, higher income and lower operating costs have kept the engine running smoothly.

“Lloyds is in fine fettle but has no intentions of standing still as it has announced a new strategic update which aims to consolidate its major strengths. The more measurable targets are stretching but eminently achievable given the current momentum, with the Return on Tangible Equity (ROTE) expected to exceed 18% by 2028 and then over 20% by 2030. The key metrics for the most part are reassuringly positive.”

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