Lloyds wants to pay a dividend next year

First quarter results posted by the bank this morning showing a 22% rise in pre-tax profit suggest it'll be ready to reward shareholders as early as May 2015.

by Emma Haslett
Last Updated: 06 Oct 2014

- From MT’s May issue: TSB boss Paul Pester - too sensitive to run a public company?

Lloyds published its first quarter results this morning, and after a slight share price hiccough in March when the government decided to sell off another tranche of its stake in the group, it looks like things are firmly back on track: underlying pre-tax profit rose 22% to £1.8bn, pushing share price up almost 3.5% in early trading.

The good news for shareholders? The bank wants to apply to the Prudential Regulation Authority (which oversees banks) in the second half of the year to pay a dividend. If it’s approved, the divi will be announced as part of the bank’s 2014 results next February, and paid out to shareholders in May 2015. Considering RBS, the government’s other banking asset, is nowhere near even being sold off, that represents impressive progress by Lloyds.

Before it can start thinking about such frivolities as divis, though, it needs to get through its selloff of TSB, which Lloyds finance chief George Culmer said would start in June. The selloff is, lest we forget, a condition of Lloyds’ 2008 bailout - but eventually it could raise £1.5bn for the bank. In June, though, TSB will only sell of a quarter of its stake. So it’s going to be a long, slow process.

The challenge, as ever, is pricing. Too much (as MT points out in this month's profile of TSB boss Paul Pester), and it risks alienating taxpayers, who had to put up with the government pumping billions into it during the recession. Too little, and Lloyds shareholders will be upset, and react in a manner not unlike when the government sold off its second tranche of Lloyds at a price that was perceived as being far too low in March, ie. angrily.

The good news was that costs fell by 5% in the period, to £2.3bn, although statutory pre-tax profit dropped 33% to £1.37bn from £2.04bn a year earlier. The bank didn’t seem too worried about that: it pointed out that last year’s figure was pushed up by gains it had made from selling £776m worth of government securities. Full steam ahead.

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