Shares in Lloyds (LLOY) slipped nearly 3 per cent after it announced another big PPI mis-selling provision hike and disappointed on the timing of its proposed return to the dividend list.
In advance of full-year figures on 13 February, Lloyds announced a further £1.8bn PPI provision, which brings the bank’s total cumulative PPI charge to an eye-watering £9.8bn. Banking analysts hadn’t expected quite so much extra PPI pain. “We had anticipated only a further £1.2bn PPI charge, with consensus expectations considerably lower,” said banking analyst Ian Gordon of Investec Securities. “Lloyds has seen a step-up in PPI charges [in the fourth quarter]”. The lender also boosted its provision for interest rate product mis-selling by another £130m.
But the grim news didn’t stop there. Management now says it expects to restart dividends in the second half - analysts had anticipated that payments would commence at the start of this year - but the planned 50 per cent of earnings payout ratio was less generous than hoped for. “There were expectations that the payout would be much higher than 50 per cent going forward,” said banking analyst Shailesh Raikundlia of Espirito Santo Investment Bank. “The market will be disappointed.”
The bad news on the dividend is harder to follow given that Lloyds’ capital pressures appear to be easing. Helped by such moves as the sale of its stake in St James’s Place, Lloyds’ Basel III tier one capital ratio rose to 10.3 per cent from end-September’s 9.9 per cent. The bank also expects 2013 underlying profit to reach £6.2bn, ahead of analysts' consensus estimates of nearer £5.8bn - reflecting “better than expected [fourth quarter] impairments”, reckons Mr Gordon.
But work has commenced on a possible sale of government-held shares to the public. That follows the government’s disposal of 6 per cent of Lloyds through a placing in September and confirmation with the Autumn Statement that “the government would like to give the British public the opportunity to participate directly in future sales”. It’s rumoured that a retail offering, possibly alongside a further placing, could be planned for as soon as April.
