Lloyds stalls on dividend
LLOYDS Banking Group will not resume dividend payments to shareholders this year, despite freeing itself of £480m a year in interest payments by redeeming £4bn in government-held preference shares.
The bank confirmed yesterday that it had sold 87 per cent of a £4bn share placing to existing shareholders at 38.43p, with a 13 per cent “rump” sold into the market at 60p per share. Profits from shares sold on the market were returned to investors who did not take up their allocation.
The success of the placing allows the bank to pay back £2.3bn to the Treasury, which itself took up £1.7bn of the share offer, maintaining its stake in Lloyds at around 43 per cent.
Lloyds was restricted from paying dividends as a condition of the government’s £17bn bailout, but as the first European bank to begin repaying state aid, it is now free in theory to resume payments to investors.
But a spokesman for the bank said it would not resume dividends this year, despite freeing itself of interest payments on 12 per cent on the government’s preference shares.
The bank, led by chief executive Eric Daniels, has already paid around £250m in interest this year, but will not now have to pay the remainder of its £480m-a-year bill to the Treasury.
The spokesman said the average shareholder would have an allocation of 340 shares, which would have made them just over £77 at today’s closing price of 66.1p. Those who did not take up their allocation would receive a cheque for £75.
The placing raised Lloyds’ core Tier 1 equity ratio by 80 basis points to 6.7 per cent, giving the bank more freedom to increase the amount it lends into the UK economy.
LLOYDS SHARE PLACING
KEY ADVISERS
Lloyds used a trio of investment banks as joint sponsors, financial advisers, bookrunners and placing agents on its £4bn share placing.
JP Morgan Cazenove was joined by Citigroup and UBS on the cash call, with JPMorgan’s team led by chief executive and former Barclays finance director Naguib Kheraj, alongside star dealmaker Piers Davison.
The UBS contingent was headed up by Tim Waddell, UK co-head of investment banking, and Christopher Fox of the Swiss bank’s corporate finance team.