Lloyds eyes return of shares to public

Lloyds Banking Group is expected to start the process of returning more shares to the public as early as next week, after the state-backed lender confirmed it was preparing the paperwork needed for a sale to private investors.

Lloyds set aside a further 1.8 billion to cover cost of compensating PPI claims. Picture: Jane Barlow

The bank also said today that it was gearing up to pay its first dividend in more than five years, depending on the outcome of talks with the Prudential Regulation Authority (PRA).

Talk of the resumption of dividend payments came as Lloyds, which is 33 per cent owned by the taxpayer, set aside a further £1.8 billion to cover the cost of compensating customers who were mis-sold payment protection insurance (PPI), taking its total provision to almost £10bn.

However, the lender forecast an underlying profit of £6.2bn for 2013, more than double the previous year’s figure of £2.6bn and well ahead of analysts’ expectations of £5.8bn.

Lloyds last paid a dividend after publishing its half-year results in 2008, just before it needed a £20bn rescue by the taxpayer, but the group is seeking the green light from the PRA to restart “a modest level” of payouts.

Chief executive Antonio Horta-Osorio said: “We expect to apply in the second half of 2014 to restart dividend payments and to deliver progressive and sustainable payments to shareholders thereafter.

“This will be another important step in our journey to rebuild trust and confidence in our group.”

Sandy Chen, banking analyst at Cenkos Securities, said the UK government would be wise to sell its remaining stake “sooner rather than later” if it wanted to maximise taxpayers’ proceeds.

He added: “Management probably intended this pre-announcement to highlight their planned resumption of a dividend in the second half, as well as the government’s imminent sale of its shares to the public – but these bits of good news are already in the share price.”

Shares in Lloyds, which is due to release its annual results next Thursday, closed down 3.3p, or 4 per cent, at 79.99p today.

Sources said the Treasury, which sold a 6 per cent stake in the group to institutional investors for £6.2bn in September, could announce plans for a further disposal shortly after the results are published, with some hinting at the sale of a larger stake. It is thought that the next tranche of shares could be offered to both institutions and members of the public.

UK Financial Investments, the body that manages the government’s stakes in Lloyds and fellow bailed-out lender Royal Bank of Scotland, declined to comment today.

A spokesman for the Treasury said all options for a share sale are under consideration, including selling to institutional investors and the public, but no timescales for a further disposal have been set and there was no certainty “that this process will take place this year”.

l Barclays chief executive Antony Jenkins today said he had turned down a bonus for 2013 due to costs incurred by the bank to deal with past problems and its £6bn fundraising.

“I have concluded that it would not be right, in the circumstances, for me to accept a bonus for 2013,” he said.