Business

Lloyds Banking Group To Pay First Dividend Since 2008

The British bank was bailed out by the government during the financial crisis, but has taken another step in its turnaround with this latest announcement.

Today Lloyds announced full-year statutory profits of $2.77 billion, and earlier this week the UK government sold off part of its stake in the bank, meaning that it is now 23.9% state-owned. At one point the government owned 41% of the bank after it invested $30.8 billion in a 2008 bailout.

Lloyds Banking Group To Pay First Dividend Since 2008

Encouraging signs from Lloyds

Lloyds announced that it would pay a dividend of 1.16 dollar cents per share, meaning that a total of $824 million will be divided among 3 million shareholders. Of that money, $200 million will be paid to the government.

The bank also set aside almost $5 billion this year in order to settle cases linked to the mis-selling of payment protection insurance (PPI), and other regulatory matters.

Lloyds’ profit marks a massive improvement over its 2013 results, when the bank made just $639 million. Following today’s announcement, shares in the bank were up 1.1% in morning trading in Europe.

It was also announced that staff would receive discretionary annual bonuses worth $569 million for 2014, with Lloyds chief executive Antonio Horta-Osorio set to receive $16.94 million.

Executive pay remains an issue

Part of that payment is the payout of a 3-year long-term incentive plan which vests this year. Horta-Osorio is set to receive 535,083 shares under a deal signed with the government in 2012, but some say that his pay package will provoke controversy, especially the share plan.

The rising share price means that the share plan has almost doubled in value since 2008. In a move which should deflect criticism, Horta-Osorio is expected to promise not to sell any of his shares until the British taxpayer has been reimbursed the money used to rescue the bank.

Mr Horta-Osorio is encouraged by the signs of progress at the bank. “We went from a very, very negative position in terms of profitability to a position where we generated £7.8bn of underlying profitability [and] we generated £1.8bn of pre-tax profit,” he said.

The mood around the bank seems to be one of quiet optimism, with Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, claiming that the resumption of dividend payments is “a sign of confidence in future prospects”, but ongoing issues due to PPI was “somewhat disappointing”.