Lloyds to pay bumper dividends in 2012

Lloyds will pay bumper dividends from 2012 as long as it can replace cheap Bank of England funding, say analysts.

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by Deborah Hyde on Aug 09, 2010 at 08:53

Lloyds Banking Group could pay out £15 billion or more in dividends in 2012 if last week's positive earnings news continues, although news that the Bank of England is reluctant to extend its loan could be a fly in the ointment, say analysts.

Lloyds is banned from paying out dividends until 2012 as part of the conditions of receiving state aid at the peak of the financial crisis. But the Sunday Times said analysts are increasingly confident that payouts will be hefty when they come.

The analysts' comments come after Lloyds reported a much higher than expected first half profit of £1.6 billion last week.

The main concern though is that the banking giant will struggle to refinance tens of billions of pounds it borrowed at low rates from the Bank of England and those fears have been stoked by a report in the Times today that the Bank of England has warned Lloyds and Royal Bank of Scotland that competition authorities in Brussels would be against an extension of the loan.

The money is due to be repaid by 2012 but many analysts had been hoping the loan would be extended given the credit markets remain difficult to access and the bank could struggle to replace the borrowing at cheap levels.

Given the taxpayer owns 41% of Lloyds and the state is looking at ways to offload its holding at a profit, politicians may be urging the Bank to rethink its increasingly hard line, the Times said.

Lloyds is likely to find it difficult to continue on its strong recovery if the loan is not extended, making a sale to the private sector difficult, the paper said.

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6 comments so far. Why not have your say?

I am not sure how these type of satatements from the BoE come to be made public. True as it might be, such advice should be offered in house. It is the type of information and advice that, could be used by the speculators against the best interests of the UK taxpayer, who of course owns 41% of Lloyds. But Merv and the gang are prone to such regular statements. It is time they supported UK Banks in their recovery-- or would they prefer more assets to be divested , for the benefit of such as Santander.

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I believe that if the BoE loan is extended on equally preferential rates then the UK/Lloyds will then go straight up against European anti-subsidy legislation.

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1. There is no way that lloyds will pay £15bn in dividends in 2012. Such a dividend would mean its tier 1 capital would fall below the minimum regulatory requirement and its banking licence withdrawn.

2. Is there any evidence that the Bank of England lending to Lloyds is at "preferential" rates?

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The regulators have become aware that the tier 1 requirements they foisted on the banks were ludicrous and the result of some knee-jerk reaction to events. Just like BASEL 3 requirements will be watered down gradually so that no face is lost by the politicos

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COuld everyone from the Bof E downward (or upward according to your taste) remind themselves that LLoyds did not ask for a loan - it was foisted on them as part of the plot to save two Scottish banks on the eve of a crucial by-election. Someone should tell Cable and Witless,who seems quite ignorant of the whole affair - so much for his financial acumen.

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snoekie

Aug 09, 2010 at 16:31

What happened to the loan by the Bank for which Gordo extracted a 12% interest rate?

Now if that is a preferential rate, may I get the same preference when I 'lend'( into my account) them money?

Lloyds should be able to refinance at a cheaper rate.

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