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Lloyds Banking Group PLC Lifts Full-Year Guidance

The shares of Lloyds Banking (LSE: LLOY) (NYSE: LYG.US) gained 4p, or 6%, to 72.5p during early trade this morning after the bank upgraded its forecasts for the full year.

The FTSE 100 member confirmed its net interest margin for 2013 would now be “close to 2.1%” versus earlier guidance of 1.98%.

Lloyds also said it now expects to reach its non-core assets target of less than £70bn by the end of the year — twelve months ahead of plan.

The updated forecasts accompanied half-year results that showed group underlying profits rising by almost £2bn to £2.9bn. However, statutory profits were hit by costs of £0.9bn that covered various restructuring and legacy items.

In addition, the interim figures revealed a core tier 1 capital ratio of 13.7% and a net tangible asset value of 54.6p per share.

António Horta-Osório, the chief executive of Lloyds, said:

We accelerated the pace of delivery on key elements of our strategic plan in the first half of the year.  We returned our core loan book to growth a quarter earlier than expected, delivered a significant improvement in our net interest margin, and are targeting additional cost reductions. “

Mr Horta-Osório added that the bank continued to meet the Prudential Regulatory Authority’s capital requirements “without recourse to further equity issuance or the utilisation of additional contingent capital securities“.

The bank’s chief executive also suggested a return to dividend payments may be on the horizon, after saying Lloyds now expects “to commence discussions with our regulators in the second half of this year on the timetable and conditions for dividend payments.

Prior to today, City experts reckoned Lloyds would produce earnings of 4.9p per share for 2013 and 5.8p per share for 2014. The latter projection places the shares on a P/E of 13.

Tentative predictions of a 2p per share dividend for next year would supply a 2.7% income.

Of course, whether those ratings, today’s results and the wider outlook for the banking sector now combine to make Lloyds a ‘buy’ is something only you can decide.

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> Maynard does not own any share mentioned in this article.