Lloyds Bank is out of taxpayers' hands: Here's what four City analysts think

Emma Haslett
Follow Emma
A Lloyds bank signboard is pictured oppo
Lloyds was in public ownership for nine years (Source: Getty)

Nine years after it first bailed out the lender, Lloyds finally passed out of public ownership today, after the government sold its final stake.

Although taxpayers seem relieved, it provoked some ire, with one group of disgruntled former HBOS shareholders accusing the government of "gloating" about its £900m profit.

Here's what analysts think:

1. "Banks remain attractive"

“As Lloyds gallops to full public ownership, banks remain an attractive investment opportunity in the long term and their strong balance sheets should allow them to cope with moderate negative shocks moving forward. We expect the sector to provide solid and dependable long-term capital and dividend growth for investors."

"Since the financial crisis, UK banks have been rebuilding their balance sheets and are now returning to form. The health of these businesses is reflected in their dividends, with Lloyds’ dividend yield currently at 3.64 per cent although its share price has come under pressure recently from the government selling down its stake. Whether or not Lloyds’ dividend is sustainable in the long term remains to be seen as it has a dividend cover of less than one, meaning it needs to borrow money to pay its shareholders which might not be appealing to some investors."

- Michelle McGrade, TD Direct Investing

2. "RBS is sulking in a corner"

"One of those helping [the FTSE 100] this morning is Lloyds, with the government’s final departure from the bank’s shareholder registry being greeted with a two per cent gain.

"RBS is sulking in a corner, barely moved, as its cousin enters a brave new world. The government made a profit on its Lloyds investment, and with dividends looking healthy it seems that private investors are convinced they can prosper too with the bank."

- Chris Beauchamp, IG

3. "Let the good times roll"

"Lloyds is already a 'recovered' bank with significantly enhanced dividend-paying capacity. Let the good times roll!

"As described in our note yesterday, we believe that Lloyds’ strategy and outlook is set fair, irrespective of its evolving ownership or management. In balance sheet terms, we continue to see it as a 'no growth' bank, albeit this conceals an ongoing positive mix effect as it rebalances the composition of its lending portfolios. We see the acquisition of MBNA, expected to complete in the second quarter 2017, as a clear positive in this regard."

- Ian Gordon, Investec

4. "Champagne corks should be kept on ice"

"It’s an interesting coincidence that one of the UK’s top fund managers, Neil Woodford, recently bought back into Lloyds after snubbing banks as uninvestable for 14 years, just as the government is stepping out of the picture.

"The Treasury won’t be making a song and dance about the Lloyds sale, seeing as we are in a period of purdah running up to the general election. Indeed the champagne corks should probably be kept on ice seeing as the taxpayer has only broken even on the face value of the Lloyds bailout, and is still nursing a loss if you factor in the borrowing costs associated with stumping up the money back in 2009.

"RBS still casts a long shadow over the banking bailout too, seeing as the taxpayer funding package was twice as big, and the bank’s shares still need to double in price before the government breaks even. Progress has been slower at RBS because it had more problems to start with, and it’s difficult to see how the government can realistically sell off its 72 per cent stake in the bank without taking a financial hit."

- Laith Khalaf, Hargreaves Lansdown

Related articles