In Depth

Lloyds' boom-era bosses sue bank for bonuses

Eric Daniels and Truett Tate claim they should have received a full payout in 2012

Lloyds sell-off expected to be complete 'in days'

2 May 

Lloyds' privatisation is set to be completed within "days", says the Financial Times.

Sources suggest the final two per cent of the bank still owned by the taxpayer through UK Financial Investments is set to be sold "within the coming fortnight", says the paper.

Lloyds has been partially owned by the public since the financial crisis, when the then Labour government's £20bn bailout bought a 43 per cent stake in the bank.

The coalition government began to sell off its shares in 2013, at which point they were well above the 73.6p average buy-in price originally paid by the Treasury.

However, the share price has been below that level for the past 18 months, but Chancellor Philip Hammond has resumed the "drip-feed" sell-off as enough money was made in the early part of the privatisation to cover the losses on more recent sales.

The sale was on track to deliver a £700m profit when the last tranche of shares was sold at the beginning of April, although that would equate to a negative real return was adjusted for inflation, though.

In addition, a promised £2bn sale of shares to ordinary investors at a discount had to be dropped.

News of the final sell-off came as Lloyds accelerated its plans to ring fence its retail bank, as demanded under new banking rules, by appointing Lord Lupton as its chairman.

He becomes the second Tory peer on the main board of the bank, alongside Lord Blackwell, Lloyds' Brexit-supporting chairman.

Lloyds defies analyst predictions of a profit drop

27 April

Lloyds Banking Group shares are surging this morning after it defied gloomy analyst predictions that its profits would fall.

Experts forecast earnings would be dragged marginally lower because of the challenge of the low rates environment, which effectively reduces the profit margin between the amount of interest banks pay on deposits and earn on loans.

Instead Lloyds reported a one per cent rise in underlying profits to £2.1bn for the three months to March, says the BBC.

Before exceptional items, pre-tax profits doubled to £1.3bn compared to the same period last year, although "last year's figure included a hefty one-off cost" - an £800m charge for buying back expensive bonds from investors.

Lloyds' past results have also been hit by payment protection insurance (PPI) compensation costs, but the amounts it is setting aside are now falling.

This time around - and as previously announced - the PPI bill was £350m, says The Guardian. Other undisclosed "misconduct costs" amounted to £100m.

Shares rose 3.7 per cent in early trading to close to 70p, in part because the strong profit showing boosted dividend forecasts.

Steve Clayton, a fund manager at Hargreaves Lansdown, said: "Lloyds' ability to generate capital, and its limited needs to retain much of that within the bank mean that it has great dividend potential.

"Sure enough, they have raised their guidance for capital generation which bodes well for the prospects for additional special dividends."

Lloyds is in the process of returning fully to the private sector and is now just two per cent owned by the taxpayer.

Lloyds still on track to deliver £700m profit to taxpayer

3 April 

Lloyds Banking Group is still on track to deliver a £700m return to the taxpayer on its 2009 bailout, despite shares still being sold at a loss.

Brokers handling the "drip-feed" sale of shares into the private sector sold another one per cent yesterday, taking the government's holding to below two per cent.

Lloyds' shares have been consistently below its 73.6p bailout buy-in price since late 2015, with the price a little above 66p this morning.

However, the bulk of the 41 per cent public shareholding so far realised has been sold at a profit and the bank has paid out dividends for the past two years, boosting returns.

The Treasury says £20bn of the £20.3bn has been returned up to now. At current prices, each one per cent of shares sold is worth close to £500m, giving a total potential profit of £700m, plus any residual dividends that are due.

Real returns will be negative over the life of the investment, however.

According to the Bank of England, inflation averaged three per cent between 2009 and 2016, meaning a £20.3bn investment would need to have returned almost £25bn by the end of last year to keep pace.

Based on these figures, the government will have recouped £21bn from Lloyds before any final investor payouts are taken into account.

The news comes on the day that Lloyds also announced it is shrinking a number of branches in response to a continuing shift of customers to online banking.

It will downsize "hundreds" of branches with limited footfall, with two staff available in each branch to help customers use machines to pay in and withdraw funds, says the BBC.

Jakob Pfaudler, Lloyds' chief operating officer for retail, said the change could mean counters in affected branches will be "boarded up".

Lloyds' £1.9bn MBNA takeover to face competition scrutiny

17 March

Lloyds Banking Group's £1.9bn buyout of credit card provider MBNA is set to face a competition investigation, the Daily Telegraph reports.

The purchase will take Lloyds' overall stake in the credit card sector to 26 per cent, second to Barclaycard, which controls 27 per cent, although it says MBNA will continue to operate separately from its existing credit card arm and offer different rates.

According to the Telegraph, the Competition and Markets Authority will conduct a simple "phase one" investigation, to be completed by 16 May, which will either clear the transaction or call for a more in-depth "phase two" probe.

"If the regulator is sufficiently worried about the impact of the acquisition, it could force Lloyds to agree to remedies to resolve its concerns, such as sell-off part of its business," it says, adding the bank had expected the deal to be subject to the scrutiny.

The purchase is seen as a big step in Lloyds' recovery from the financial crash, alongside its creeping full privatisation, which this week saw the taxpayer's stake in the bank fall below three per cent.

In addition, amid an ultra-low interest rate environment, it will also boost margins for a lender heavily skewed towards mortgage-lending activities.

Taxpayers £800m away from recovering Lloyds investment

15 March

UK taxpayers now own less than three per cent of Lloyds Banking Group to below three per cent, bringing full privatisation one step closer.

The Treasury sold another one per cent stake in the bank yesterday, taking the total amount recovered since the bank's bailout in 2008 to £19.5bn.

As a result, UK Financial Investments, the independent unit controlling the Treasury's bank investments, is a mere £800m short of recouping the full £20.3bn invested during the peak of the financial crisis, when the government took a 43 per cent share in Lloyds.

Lloyds's share price is currently 68p. When the government sold a one per cent stake in January, at 66p per share, Sky News said it was worth around £470m. At today's prices, the final three per cent in Lloyds would be worth enough to deliver a profit of around £700m, plus any final dividend payouts that are due. All proceeds are being used to pay down national debt.

While that is a poor return in percentage terms, it will be viewed as a success in cash terms.

Simon Kirby, economic secretary to the Treasury, said: "Lloyds's recent annual results show that we are in a good position to reduce our shareholding further and expect to recover all of the money taxpayers injected into the bank during the financial crisis."


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