News Column

Business analysis: Lloyds payout: Bank's growing bill for PPI has put paid to dividend hopes, says Jill Treanor

February 4, 2014

Jill Treanor

Let's be honest, this was not the announcement that Lloyds boss Antonio Horta-Osorio wanted to make. The Portuguese banker had wound up City analysts to such an extent they had started to believe the bailed-out bank could start paying dividends as early as the full-year results in a fortnight's time. But another staggering provision for payment protection insurance mis-selling has put an end to any hopes of such a quick resumption of payouts to shareholders, which had been banned until last year under the terms imposed by the EU on the pounds 20bn 2008 bailout. The latest pounds 1.8bn for PPI takes the total now set aside by Lloyds to almost pounds 10bn. It is as if Lloyds had paid for the entire nation to have a 2.5p reduction in the basic rate of income tax for a year. Quite a bill for a bank whose previous boss, Eric Daniels , insisted Lloyds had been "on the side of the angels" when it came to PPI sales. Daniels may be history, but this management team also has some explaining to do. One minute Lloyds says the number of claims will start to wind down, now it says it expects a further 550,000 complaints. It is amazing how putting together a prospectus for a share sale to retail investors can focus the mind. While the bank is now six months behind on its dividend hopes, it is still rattling along in the process of getting the taxpayer off its shareholder register. After the results on 13 February, the next big date to watch is 6 March - the day the annual report is published. Aside from spelling out what bonuses are being clawed back from Daniels and other former executives, the fully audited results are an obvious moment for big City investors to be offered another tranche of shares, and shortly afterwards to push the button on the retail offering to small investors. Lloyds already has 2.7 million private investors, thanks to its rescue of HBOS (many of its investors had "free" Halifax shares), and it could get millions more through a retail offering. Then Horta-Osorio's dividend promises will become an even more important story.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Guardian (UK)


Story Tools