Lloyds to re-start dividend payouts
Lloyds Banking Group is expected to announce its first shareholder payout in seven years when it reports its annual results tomorrow.
It is understood to have won permission from the Government, which owns just under 25% of the lender, to make the dividend payout.
Lloyds was rescued after a £20bn taxpayer injection in 2008 at the height of the financial crisis.
The bank is also expected to announce that it will pay out in the region of £375m in bonuses, which is 5% lower than last year.
Lloyds chief executive Antonio Horta-Osorio is reportedly in line for an £11m payout, including £7m from a long-term share-based plan.
The lender was fined more than £215m last year for its role in the global Libor rate-rigging scandal, and the punishment is expected to be reflected in the lower overall bonus payout.
However, the bonuses are likely to prove controversial as they come four months after Lloyds took an axe to its branch network and announced 9,000 job cuts under plans to sideline its traditional over-the-counter service.
Royal Bank of Scotland (RBS), which is 80% owned by the taxpayer, announced today that its bonus pool had been cut 21% to £421m.
The majority of the bonuses awarded for 2014 are subject to long-term deferral and paid in shares rather than cash.
The Government will ensure that the two taxpayer-backed banks will be subject to a £2,000 cap on cash bonuses for a sixth year in a row.
The move to pay bonuses comes after Lloyds scraped through a Bank of England stress test in December which suggested it was ”susceptible to a severe economic downturn” though its recent actions to shore up the business left it on a firmer footing.
Lloyds is expected to report annual pre-tax profits of around £2bn tomorrow, up from £415m a year earlier, after putting aside another £600m to compensate customers who were mis-sold payment protection insurance (PPI).
Underlying profits for the year are expected to rise from £6.2bn to £7.8 bn.
It comes as the Treasury continues to sell down its stake in Lloyds.
On Monday the Government said it had raised about £500m by reducing its stake to 23.9%, compared with 40% when it was bailed out during the financial crisis.
A pre-election sale of shares in Lloyds to ordinary members of the public was ruled out last year by Chancellor George Osborne.
Brokers say the move to start re-start dividend payments will make the Government’s shares more attractive to investors.
Analysts at Morgan Stanley rate Lloyds, which also owns of the UK’s biggest mortgage lender Halifax, as “overweight”, saying it stands to benefit from the improved UK housing market and is building its capital strength faster than peers.
