UPDATE 1-Lloyds full-year profit flat as bad loan charge weighs

(Adds details on outlook, targets) LONDON, Feb 22 (Reuters) - Lloyds Banking Group reported flat annual profit for 2022 on Wednesday, as a jump in income driven by higher interest rates was offset by mounting bad loan provisions. Britain's biggest mortgage lender reported pretax profit of 6.9 billion pounds ($8.4 billion), unchanged on the prior year and in line with analyst forecasts compiled by the bank. The bank announced it would pay a 1.6 pence per share final dividend and a share buyback of up to 2 billion pounds, taking total shareholder returns for 2022 up to 3.6 billion pounds. While British inflation has come off the boil, steep energy and food bills are still pinching household budgets and have raised the risk of people defaulting on loans.

Lloyds set aside 1.5 billion pounds over the year to cover potential defaults, compared to a 1.4 billion pound release of provisions in 2021 as the economy rebounded from COVID-19 lockdowns. Lloyds' revenue leapt 14% to 18 billion pounds and it raised its medium and long-term outlook for returns. It is now targeting a return on tangible equity in excess of 15% by 2026, having previously targeted more than 12%.

Lloyds - which also owns the Halifax, Bank of Scotland and Scottish Widows brands - is the last of Britain's 'Big Four' high street banks to report full-year earnings, after HSBC, NatWest and Barclays.

Rivals have reported robust profits but struggled to convince investors the boost from higher central bank rates - enabling them to cash in on the widening gap between what they charge on lending and pay out on savings - will be long-lasting. ($1 = 0.8256 pounds) (Reporting by Iain Withers and Lawrence White, Editing by Sinead Cruise)