Traders bank on Lloyds to start stream of divis
THE City was licking its lips at the prospect of some tasty future dividends from Lloyds Banking Group today, as Britain’s biggest lender starts to show leaping profits.
With “legacy” issues such as PPI — which has cost £17 billion — fading and Lloyds asserting its market dominance, analysts think it will soon become a high-yielding stock again, as it was before the banking crisis. As one of the most widely held shares in the UK, that’s good news for pension funds and
2.5 million small shareholders.
First-quarter profit was £1.3 billion, double the year before. The bank set aside another £450 million to deal with past failings — £350 million more for PPI and £100 million for the Reading branch scandal.
Lloyds remains the star of the UK banking show with another impressive set of numbers in its firstquarter trading update.
Neil Wilson at ETX Capital said: “It looks as if it can manage to increase dividends further — perhaps as high as 6p this year if the tailwinds are right, which at present valuations would equate to nearly a 9% dividend yield based on Wednesday’s closing price. A rerating of the stock based on strong dividend potential looks likely.” The shares rose nearly 4% to 70p today, giving Lloyds a valuation of nearly £50 billion.
Chief executive Antonio HortaOsorio shrugged off talk of a credit bubble, saying there is no sign yet of customers struggling to service debt.
He also doubts whether there will be an interest-rate rise this year. “We are seeing inflation rising. That would normally be a factor to push rates up but you have to see through that.”
Ian Gordon at Investec thinks the shares are a clear Buy. He said: “Lloyds’ investors are waking up to a (pretty glorious) reality. Further upgrades seem inevitable.” @SimonEngStand