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Lloyds Banking Group profit hits record $7.4 billion but misses estimates

  • Lloyds reported its highest pre-tax profit since 2006 on Wednesday.
  • The 24 percent rise in profit to £5.3 billion beat last year's record of £4.2 billion.
  • But it fell short of the £5.73 billion expected by analysts in a poll provided by the bank.

Lloyds Banking Group reported its highest pre-tax profit since 2006 on Wednesday, announcing a share buy-back of up to £1 billion and £3 billion of strategic investment over the next three years.

The 24 percent rise in profit to £5.3 billion ($7.4 billion) beat last year's record of £4.2 billion but fell short of the £5.73 billion expected by analysts in a poll provided by the bank.

Chief Executive Antonio Horta-Osorio said 2017 had been a "landmark year" for the group, which returned to full private ownership for the first time since 2008, when it was the subject of a bailout by taxpayers worth some £20.5 billion.

Niklas Halle'n | AFP | Getty Images

"We have delivered another year of strong financial performance with improved profits and returns... and have now built the largest and top rated digital bank in the U.K.," Horta-Osorio said in the statement.

The bank's planned £3 billion in strategic investment will be spent largely on digital technology and staff, although the bank said it remained committed to its branch network, which has seen scores of closures since the financial crisis.

The strategy responds to new regulation forcing big banks to open up their customers' data to rival lenders and financial technology firms, enabling them to compete more effectively for customers.

The bank said it will revamp its app and digitize 70 percent of its processes by 2020, enabling it to lower its cost income ratio to the low 40s from 46.8 percent in 2017.

It also plans to ramp up its financial planning and retirement business, increasing open book assets by £50 billion by 2020 and expanding its corporate pension customer base by 1 million.