Shares broke through the 60p price barrier for the first time in almost two years, closing at 60.9p. The government regards 61p as its break-even point after it bailed out the bank to the tune of £20.5 billion during the banking crisis.
The strong rise in the price will encourage the coalition to kick-start a privatisation of the state’s 39 per cent stake in the bank.
At Lloyds’ annual general meeting in Edinburgh yesterday, chief executive Antonio Horta-Osorio said that the “transformation” of the bank was ahead of plan, two years into a three-to-five year strategy that would see it return to private ownership “as quickly as possible”. He added that it was on course to cut costs by £1.9 billion by the end of 2014.
He said: “We expect to return to profitability this year and to grow our core business, to realise our full potential to deliver strong, stable and sustainable returns for you, the shareholders, and to allow UK taxpayers’ investment in the group to be repaid.”
Chairman Sir Win Bischoff, who last week announced that he would retire by next year’s AGM, confirmed the group’s plan to pursue on initial public offering (IPO) of its TSB Bank business by mid-2014.
The new bank, comprising 632 Lloyds TSB branches, will be rebranded as TSB by September after the £700 million sale of the business, known as Project Verde, to the Co-operative Bank fell through.
At the Edinburgh International Conference Centre yesterday, a number of shareholders raised concerns over issues such as executive pay, the treatment of its business customers, the £7bn it has set aside to pay redress for miselling payment protection insurance (PPI) to customers, as well as the bank’s use of tax havens for offshore subsidiaries.
Horta-Osorio said that the bank undertook a review of these and that last year the bank closed 60 offshore vehicles.
He pledged to “close them all, unless there are strong business reasons on behalf of our customers to continue operating them”.
Bischoff was forced to defend executive pay policies. Anthony Watson, the chair of the remuneration committee, said that the long-term incentive plan had not paid out bonuses for four years.
Bischoff acknowledged that shareholders might be awarded free shares when the government begins to divest its stake.
He said: “The question of free shares for shareholders is something we may very well wish to consider at some time.”
There was still anger among shareholders over the bank’s takeover of HBOS, which forced the previously stable Lloyds business to rely on the government bailout.
“Remember, none of the board in front of you here were involved in the HBOS acquisition. With the benefit of hindsight, the benefits of acquisition will not be fully realised. We have to look forward and that is what we are doing now,” said Bischoff.
All resolutions voted on by shareholders were passed. Just over 4 per cent of shareholders voted to reject the bank’s remuneration report, while a further 8 per cent abstained bringing the total protest vote to 12 per cent.