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Bank awaiting regulator go ahead to resume payouts

Shareholders hoping Lloyds will announce return to paying dividends

AntonioLloyds Banking Group is expected to announce its return to the dividend list on Friday for the first time since it was bailed out by the taxpayer.

However, the move will require the backing of  the Prudential Regulation Authority which may not make its decision until midweek. If it gives the go-ahead it may help the government sell shares in the bank which has been slower than expected.

The bank believes its case for a return to making shareholder payouts is helped by the efforts made to strengthen its balance sheet. It now has one of the most robust capital reserve positions of any of its rivals.

A failure to secure approval from the PRA may prove embarrassing to chief executive Antonio Horta-Osorio (pictured) who is due to receive a multi-million bonus for hitting a number of targets. His bonus will be paid in shares in order to minimise the backlash from critics.

A small dividend of about 1p a share is expected alongside year-end results and will be a modest return for patient shareholders who once relied on the bank to provide one the most generous payouts on the market. Lloyds shareholders last received a dividend in October 2008. The European Commission banned further dividends as a condition of the bank receiving state aid.

The government indicated at the end of last year that it would sell further blocks of shares to institutions through Morgan Stanley but the process has proved to be slow. Declaring a dividend will make them more attractive to buyers.

UK Financial Investments, which manages the government’s stake in the bailed out banks, raised £7.4 billion through two sales of Lloyds shares to institutions in September 2013 and March 2014, which have reduced the taxpayers’ stake from 39% to 25%.

Lloyds is expected to report a pre-tax profit before one-off items of £7.5 billion against £6.2bn last time.

 

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