Lloyds reinstates its divi

Lloyds Banking Group has posted its first annual profit since a 2008 bailout by the British government. Picture: AFP

Chief executive Antonio Horta-Osorio said yesterday that he was “delighted” at unveiling a 0.75p dividend for 2014, and that the increasingly cash-generative bank aimed to pay half its earnings to investors over the medium term.

The renewed divi amounts to £535 million split among the group’s three million shareholders, with £130m going to the government, which still sits on a 24 per cent holding in Lloyds from the £20 billion state rescue.

It came as the bank, which accounts for one in three of Britain’s current accounts, reported a full-year statutory profit of £1.8bn.

Underlying profits, stripping out further exceptional charges including £700m for mis-selling loan insurance, rose 26 per cent to £7.8bn from £6.2bn in 2013.

Lloyds’ total current bill for the loan insurance mis-selling is more than £12bn, the most of any UK bank. Providing further firepower for the dividend restoration, the group revealed that the capital cushion underpinning its loanbook lifted 2.5 per cent to 12.8 per cent of its risk-weighted assets last year.

Horta-Osorio, who receives a multi-million pound bonus – mainly long-term incentives for the three-year turnaround of the then-lossmaking bank – said the results showed a “robust” business much less dependent on riskier wholesale financial market funding.

He noted that Lloyds had increased its small business lending 19 per cent last year, helped more first-time UK homebuyers than any other bank, and that the government had already got £8bn of taxpayers’ money back through selling down its stake.

“We know we have much more to do, but today this bank is strongly profitable and well-placed for further growth,” Horta-Osorio added.

City professionals said the restoration of the divi was key to helping the government sell its remaining holding in the group, making the shares more attractive and raising the prospect of a sale to private investors. Previous sales down from an original holding of 41 per cent have gone to institutional investors only.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, commented: “Set against a hitherto disappointing banking results season, the numbers from Lloyds are something of a breath of fresh air.”

Royal Bank of Scotland, still majority owned by the taxpayer, revealed a £3.5bn statutory loss earlier this week, and is seen as still some way off being able to restore its own dividend.

Both banks were prevented from making dividend payments as part of the conditions of their bailouts imposed by the European Union.

Lloyds, owner of Bank of Scotland, Scottish Widows and Halifax, also made a £925m writedown for other regulatory and conduct-related matters during 2014. This included £150m to cover the mis-selling of interest rate products to small businesses and the group’s £217m fine relating to the alleged fixing of the Libor rate.