European Commission barred plan by Lloyds

Lloyds chaiman Lord Blackwell tells the banks annual meeting in Edinburgh it has a wait-and-see view on the Scottish referendum

The proposed move emerged when Lloyds chief executive Antonio Horta-Osorio answered questions on the topic from private shareholders at the bank’s annual meeting in Edinburgh yesterday.

Some were unhappy that the flotation of TSB, due within eight weeks, is forecast to raise less than £2 billion. They demanded to know why Lloyds could not simply give the new shares out to its own investors, allowing them to hold on to them in the hope they could later sell them at a more favourable price.

The TSB sale has been forced on Lloyds by the European Commission, which said it must divest 632 branches and a chunk of its current accounts and mortgage book because it received state aid during the financial crisis. An attempt to sell the branches to the Co-operative Bank collapsed last year.

Horta-Osorio said that he had approached the European Commission over the possibility of giving TSB to Lloyds shareholders as an option.

“That option was denied,” he said. Any such move would have left the UK government with a stake in yet another bank. Directors refused to be drawn on the exact valuation for TSB.

Horta-Osorio also reinforced his commitment to restarting dividend payments for the first time since its 2008-9 government bailout. He said he plans to approach the financial regulator for permission to begin paying dividends again in the second half of the year.

He said the move would help “restore trust and confidence” in the group, although the first payments will be “modest”.

In the medium term the bank aims to pay out at least 50 percent of its “sustainable earnings” through dividends.

Because it was focused on UK retail and commercial banking and had few investment operations, he said Lloyds was a lower risk business than most other banks.

The board faced a volley of questions over Lloyds’ preparations for Scottish independence. Unlike Standard Life, which used its AGM earlier this week to restate its position, Lloyds said it was taking a wait-and-see approach to the referendum. Standard Life said it is making detailed preparations in order to have enough time to relocate businesses in the event of independence.

Lloyds’ chairman Lord Blackwell told the meeting: “We are not at this point planning any moves because we don’t know what the result will be.

“If Scotland were to vote for independence we will seek to work with relevant authorities to ensure we have a way forward to achieve our core purposes of serving customers across the UK.”

Lloyds, which owns Bank of Scotland and has its registered offices in Edinburgh, has warned that a vote for independence will impact its cost of funding, taxes and compliance costs.

And while it is not making any plans for an independence scenario, when asked to offer guarantees, Blackwell did not rule out moving operations and jobs south of the Border.

The AGM saw a vote of almost 13 per cent against approval of directors’ remuneration implementation report.