Lloyds Bank’s return to dividend payments is a very significant step forward, and RBS may not be as far behind as people think either. The most encouraging news from Lloyds is that its capital position is now extremely strong, which not only gives regulators the comfort they need but also allows the bank to start growing its loan book again. Shareholders and taxpayers should start to see the benefits of this: we think Lloyds can pay out dividends of 5-6p a share over the next couple of years (and that should support a share price in excess of 100p). This level of dividend should attract income investors back to the stock again, and allow UKFI to sell down its remaining holding at a profit. It will not all be plain sailing from here – there will be more PPI and conduct fines to come, and the General Election adds some short-term uncertainty – but UK banks are starting to perform like normal companies again.
Andre Spicer is professor of organisational behaviour at Cass Business School, says No.
There is still a long way to go in reforming UK banks. They continue to pay out billions on a regular basis to make amends for bad behaviour. And we have probably not heard the end of the bad news. For instance, last week, the US Department of Justice announced it was investigating whether banks had been involved in the manipulation of precious metals markets. The good news is that banks and regulators are trying to do something about it. There are a dizzying array of initiatives underway. These include changing the way bankers are remunerated, the culture within banks, ring-fencing investment banks from retail banks, and increasing the personal accountability of directors. Banks have invested hugely in these initiatives. The results will take years to come to fruition, but in the meantime, they will be forced to deal with a stream of bad press about their past failings.