Lloyds Banking Group is reportedly getting ready to pay out more than £2bn in dividends to shareholders, despite fears of further costs related to the mis-selling of loan insurance.
The Sunday Times reported today that Lloyds chief executive Antonio Horta-Osorio is attempting to convince regulators that the bailed-out bank has enough capital to afford the payout ahead of when the bank reports its full-year results on Thursday.
According to the report, Horta-Osorio is looking to pay about £1.5bn, or 2p a share, in ordinary dividend and at least £500m in a one-off special dividend.
Lloyds declined to comment.
Analysts at Jefferies have said that a “strong and growing capital base” should enable Lloyds to pay 2.5p per share of ordinary dividends for 2015, with dividends rising to 4.7p per share by the end of 2017.
But other analysts have raised questions over the lender’s ability to make the payment when it could take a further hit for payment protection insurance (PPI) claims.
Ian Gordon, head of banks research at Investec, is assuming a further £2bn in PPI-related costs for Lloyds in the fourth quarter of 2015, and £1.1bn thereafter, while equity researchers at Barclays said in a recent note that the “increased likelihood of higher PPI provisions in the fourth quarter reduces near-term dividend prospects”.