Lloyds Shareholders to be Rewarded with 5% Yield in 2016

Equity analysts are disappointed Lloyds income continues to suffer from the mis-selling of PPI - but confident that the bank will increase its dividend payouts this year and next

Erin Davis 3 August, 2015 | 1:34PM
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Lloyds’ Banking Group’s (LLOY) first-half results brought some bad short-term news but reinforced our positive long-term view on the bank. We were especially disappointed to see that Lloyds has had to put aside £1.4 billion of additional provisions for claims relating to the mis-selling of PPI insurance, bringing total provisions to a whopping £13.4 billion.

Political risks are more material than PPI payouts

The bank’s paltry £717 million half-yearly net income available to common shareholders also included a £745 million loss on the sale of TSB and £435 million of other misconduct charges. Still, the bank’s underlying performance was impressive: underlying return on equity was around 15% as we calculate it, annualised loan losses were a mere 0.07% of loans, and the underlying cost/income ratio was a market-leading 48%.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Lloyds Banking Group PLC45.05 GBX0.61Rating

About Author

Erin Davis  is a senior banking analyst for Morningstar.

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