September cannot come soon enough for Lloyds Banking (LLOY). This week, to broad market surprise – that is, if hidden charges to UK bank income statements can still qualify as a surprise – the lender announced another £550m provision for payment protection insurance (PPI) charges during the second quarter. Investors in the lender can only hope another surge of claims does not land before the Financial Conduct Authority’s 29 August deadline.
When the dust finally settles on the scandal, Lloyds’ compensation bill for PPI will have passed £20bn, equivalent to the bank’s entire pre-tax profits since 2015. But that is history now. The most immediate impact of the charge will be on near-term efforts to build the common equity tier-one capital ratio.
Management now expects to hit the lower end of a 170-200 basis points target range in 2019, while the expected return on tangible equity has been narrowed to 12 per cent. As recently as May, the bank thought a return of 14 to 15 per cent was possible.
Wishing away the summer only takes us to an autumn set to be dogged by political and economic uncertainty. Chief executive António Horta-Osório’s tone remains cautious. As such, income-seekers are likely to welcome the dividend rise and news that half the £1.75bn share buyback programme is already complete.
Consensus forecasts are for earnings of 7.76p a share this year, rising to 7.94p in 2020.
LLOYDS BANKING (LLOY) | ||||
ORD PRICE: | 52.3p | MARKET VALUE: | £36.9bn | |
TOUCH: | 52.29-52.32p | 12-MONTH HIGH: | 67.9p | LOW: 49.5p |
DIVIDEND YIELD: | 6.2% | PE RATIO: | 10 | |
NET ASSET VALUE: | 69.5p | LEVERAGE: | 18.0 |
Half-year to 30 Jun | Total operating income (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
2018 | 8.97 | 3.12 | 2.9 | 1.07 |
2019 | 8.82 | 2.90 | 2.7 | 1.12 |
% change | -2 | -7 | -7 | +5 |
Ex-div: | 8 Aug | |||
Payment: | 13 Sep |