The British bank, which last paid a dividend in 2008 before it was
rescued by taxpayers during the financial crisis, said on Monday it
expected to apply to the regulator in the second half of the year to
restart dividend payments.
Most analysts and investors had expected the bank to announce a
small dividend for 2013 alongside its full-year results later this
Banking and political sources have said that Lloyds' dividend plans
would be an important factor in the government's decision on when to
sell its remaining 33 percent stake in the bank.
Finance Minister George Osborne wants to sell the stake by the next
parliamentary election in 2015 and is keen for some of the shares to
be offered to the public. Retail investors would find Lloyds' stock
more attractive if it was paying a dividend.
Lloyds said last October it would set out its dividend policy
alongside its 2013 results, but had not stated when it expected to
The bank's shares were down 2.9 percent at 1155 GMT (6.55 a.m ET) on
Monday, underperforming a 1 percent fall in the European banking
Lloyds rushed out an unscheduled trading update on Monday ahead of
its full-year results on February 14, flagging the new charge for
mis-selling loan insurance. That takes the total it has set aside to
compensate customers mis-sold payment protection insurance (PPI) to
9.8 billion pounds — the most of any bank.
PPI was sold by banks and other lenders to millions of customers.
But the policies were discredited when it emerged many borrowers
were ineligible to claim on them — leaving the industry with a 20
billion pound compensation bill.
Finance Director George Culmer declined to comment on whether the
bank would have been able to pay a dividend for 2013 if it had not
taken another mis-selling charge.
State-backed rival Royal Bank of Scotland <RBS.L> also published an
unscheduled update last week, saying it would take 3 billion pounds
of new charges to cover the cost of past misconduct.
Despite its latest mis-selling setback, Lloyds remains much closer
to returning to private hands than RBS, which is seen as being three
to five years away from a return to privatization.
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Lloyds is preparing a prospectus for the sale of government-owned
shares to the public after the state raised 3.2 billion pounds
through the sale of a 6 percent stake in September.
Culmer told reporters on Monday that process was "pretty well
Deutsche Bank analyst Jason Napier said Lloyds' dividend
announcement raised questions over the timing of a government share
"We and many investors we talk to had thought that a return to a
modest dividend at 2013 was a 50/50 outcome. For some therefore,
capital return may be 6-12 months later than expected."
The size and structure of the sale will be decided by Britain's
finance ministry and UK Financial Investments, which manages the
government's stakes in Lloyds and RBS.
A sale to the public would mark a significant milestone in Britain's
recovery from the crisis, when taxpayers pumped a combined 66
billion pounds into the two banks.
Starting from a small base next year, Lloyds is aiming to build up
its dividend payouts to a ratio of at least 50 percent of
sustainable earnings in the medium-term.
"The 50 percent ratio is good but some people had hoped for as much
as 70 percent in 2015 and that looks ambitious now," one of Lloyds
biggest 50 institutional investors said.
Lloyds said underlying profit was 6.2 billion pounds in 2013 and it
expects to announced a "small statutory profit before tax" when it
publishes full-year earnings on February 13.
($1 = 0.6085 British pounds)
(Editing by Erica Billingham)
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